August 26, 2014

Home Prices in 20 U.S. Cities Rose in June at a Slower Pace

• The S&P/Case-Shiller index of property values ▲8.1% YoY in June
• The smallest 12-month gain since January 2013
• Price gains are slowing as more houses are coming up for sale and investors retreat to the sidelines
• Property value ▲0.8% QoQ in Q2, after ▲1.3% in Q1.
• Residential real estate has yet to bounce back fully from a cold and wet winter that slowed sales early this year. Contracts on new homes ▼ unexpectedly in July

Thought

As a matter of fact, this decline in home sales is a good news. If labor market is significantly improving, the home sales should increase with it. So decline in home sales can imply that labor market is not in the best shape it can be, which supports Allen's statement that there is still a room for improvement in the labor market.

Consumer Confidence in U.S. Rises to Almost Seven-Year High

• Consumer confidence in U.S. ▲ to 92.4 (89.0 predicted), compared with ▲90.3 last month.
• The highest level in almost seven years
• Along with a pickup in the job market and stock prices advanced to records
• Americans’ assessments of current labor-market conditions were more upbeat
• The share of who said jobs were currently plentiful ▲ to 18.2%, the most since March 208. The ▲2.6% MoM, the biggest ▲ since January 2006

Draghi Pushes ECB Closer to QE as Deflation Risks Rise

• Stocks ▲, the euro ▼ and bond yields ▼ to record lows today as the comments fanned speculation the ECB is finally heading for a form of monetary stimulus it has long avoided
• The yield on Belgian two-year governments fell below 0 for the first time
• Italian 10-year yields ▼ to a record-low 2.44%
• Euro-area inflation slowed to ▲0.3% this month.
• Draghi’s fear is that if inflation expectations keep falling, they’ll affect actual inflation as investors, consumers and companies pull back spending in anticipation of even weaker prices
• That could tip Europe into a deflationary spiral that would be hard to reverse
• German weakness
• E.U. GDP stagnated in Q2, unemployment probably held at 11.5% in July; near the 12% set last year and almost twice as high as the U.S. rate
• Business confidence in Germany declined more than forecast this month
• Escalating international sanctions against Russia are adding to the trade risks
• French GDP has stagnated the past two quarters, and the economy minister call for fiscal stimulus to bolster growth

Thought:

Draghi said few months ago that he will do everything to restore economy. As tensions in Russia gets longer, German economy is stagnated so as France, Italy and Spain. This ECB QE will help out not only easing deflation risks, but also economy in euro area.

So yes, it is all about crisis in Ukraine. If it gets eased shortly, it is most likely E.U.'s economy will get better soon.

S&P is increased up to 2,000 points as expectation of QE from ECB rises. Tensions in Ukraine eased as German and Ukraine government began talk yesterday, and consumer confidence in U.S. recorded a almost seven-year high.

Concern that trading volume is significantly low, investors could be reluctant in the current market level. However, economic data and geopolitical issues are giving a positive signal in the economy.

Europe market also increases as geopolitical risk eased and ECB QE is expected. Even German Business Expectation is lower than forecast, it will get better once the risk is eased.

USD appreciated against EUR as QE is expected to implement in euro area. Weaken German business indicators also causes decrease in EUR.