David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Housing Hotbed Offers Rest of World a Correction-or-Crash Test

    This article from Bloomberg may be of interest to subscribers. Here is a section:

    By March, it will be a year since the Bank of Canada began raising interest rates — meaning ever more of the record number of people who took out short-term or floating-rate mortgages at historically low rates will find themselves fully exposed to the roughly fourfold jump in borrowing costs since then, a potentially catastrophic shock to their personal finances.

    The fate of Canada’s housing market will depend on whether or not they can hold on. And just as the country was a leader in the years-long global real estate frenzy, how its downturn plays out — a relatively orderly correction, or a brutal crash — may be a harbinger for what awaits the rest of the world.

    Housing markets around the globe are wobbling under the weight of central bank rate-hike campaigns, with a handful of frothy countries joining Canada in already seeing precipitous price declines. More than a dozen developed economies, from Australia to Sweden to the US, are in the midst of downturns — defined as two consecutive quarters of falling prices — or will be by the beginning of next year, according to Oxford Economics. If those slumps prove worse or more widespread than expected, it would deepen a potential global recession. 

     

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    Saudis Deny Report of Discussion About OPEC+ Oil-Output Hike

    This article from Bloomberg may be of interest to subscribers. Here it is in full:

    Saudi Arabia denied a report that it is discussing an oil-production increase for the OPEC+ meeting next month, and said it stands ready to make further cuts if needed. 

    Crude futures pared earlier losses, trading 1.8% lower at $86.04 a barrel as of 5:18 p.m. in London. 

    “The current cut of 2 million barrels per day by OPEC+ continues until the end of 2023,” Saudi Energy Minister Prince Abdulaziz bin Salman said in a statement via the Saudi Press Agency. “If there is a need to take further measures by reducing production to balance supply and demand, we always remain ready to intervene.”

    Oil futures earlier dropped as much as 6.1%, dipping below $85 a barrel for the first time since September, after the Wall Street Journal reported that the kingdom and other members of the group were considering raising output by as much as 500,000 barrels a day. 

    That would have been a major reversal after the Organization of Petroleum Exporting Countries and its allies decided in October to cut production by 2 million barrels a day. US President Joe Biden has slammed the move, saying it endangers the global economy and aids fellow OPEC+ member Russia in its war in Ukraine.

    After an initial rally following the cuts agreement, crude prices have declined as the economic outlook deteriorates and China continues to grapple with Covid-19 outbreaks. OPEC twice reduced its forecasts for global oil demand, and Prince Abdulaziz has said the group will remain cautious due to “uncertainties” about the health of the global economy. 

    Saudi Arabia has already cut oil exports sharply this month to deliver on the OPEC+ agreement, according to data from energy analytics firm Kpler Ltd. The cartel’s next meeting is scheduled for Dec. 4.

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    Gold, Copper Slip as Traders Favor Dollar on China Covid Worries Bloomberg

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    Gold fell to the lowest in over a week as the dollar advanced amid concern China may reverse its lighter-touch approach to the coronavirus. Copper also fell.

    Worsening Covid-19 outbreaks across China and the first deaths in Beijing for six months are stoking concerns that authorities may again resort to harsh restrictions. That would be bearish for the copper market, where a squeeze in global supplies just appears to be easing. US equities declined, while the dollar rose on haven buying, pressuring gold and copper as they’re priced in the greenback. 

    Commodities have been pressured in recent months by the Federal Reserve’s aggressive monetary tightening to fight inflation, with a gauge of the raw materials recording two consecutive quarterly losses by the end of the third quarter. 

    Traders are now waiting for fresh clues about the Fed’s interest-rate hiking path from the central bank’s minutes due on Wednesday. 

    San Francisco Fed President Mary Daly said that officials will need to be mindful of the lags with which monetary policy work, while repeating that she sees interest rates rising to at least 5%. Her counterpart at the Cleveland Fed, Loretta Mester, said she has no problem with slowing down the central bank’s rapid rate increases when officials meet next month.

    Spot gold slipped 0.7% to $1,739.10 an ounce as of 4:06 p.m. in New York. Copper for three-month delivery on the London Metal Exchange fell 2.4% to settle at $7,880.50 a metric ton. All other main LME metals declined. The Bloomberg Dollar Spot Index gained 0.7%. Silver and palladium spot prices dropped, while platinum gained.

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    2023 Outlook: Bear with it

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    Euro-Zone Banks Return 296 Billion in Cheap ECB Funding

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    Banks will return €296.3 billion ($308 billion) of cheap loans to the European Central Bank after their terms were toughened to help the battle against record inflation. 

    The repayment represents just under 15% of the total outstanding amount of so-called TLTRO loans, which were used during the pandemic to keep credit flowing to households and businesses. The median forecast in a Bloomberg poll this month was for €600 billion to be given back. The projections ranged from €200 billion to €1.5 trillion.

    German two-year bonds erased losses and outperformed equivalent interest-rate swaps after the data. The spread between yields and swap rates widened two basis points to around 84 basis points.

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    Old Tankers Get a Second Life at Russian Ports as Sanctions Near

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    Traders are increasingly turning to near-obsolete oil tankers to transport cargoes of Russian crude as sanctions targeting the nation’s petroleum revenues draw ever closer.

    Since June, a total 17 crude cargoes have been collected from Russian ports by tankers that are at least 20 years old.

    That’s an age when they reach the end of their normal working lives and owners consider selling them for scrap. It’s more than double the number of such shipments during the same period in 2021, according to data compiled by Bloomberg from Vortexa Ltd. The market is preparing for sanctions from Dec. 5 that will make shipping Russian crude trickier for owners, and insurance harder to obtain. There has been uncertainty about how the country will get its barrels to market, with an increase in
    second-hand vessel transactions thought to be earmarked for the trade.
     

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    FTX Latest: Bitcoin Weathers Gloom; Bankman-Fried Faces Grilling

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    Bitcoin is up about 3% this week, topping global stocks and bucking the chaos sparked by FTX’s chaotic bankruptcy.  

    Democratic lawmakers who received millions of dollars in campaign donations from Sam Bankman-Fried say they will be ready to grill the former FTX CEO about the exchange’s collapse. 

    Liquidators appointed by a Bahamian court to take over FTX Digital Markets Ltd.’s affairs said there’s “significant” concern that FTX management lacked authority to put the crypto businesses into bankruptcy in the US.

    The embattled cryptocurrency mogul and two other top FTX executives received massive loans from affiliated trading arm, Alameda Research. Advisers overseeing the bankruptcy of FTX Group are struggling to locate the company’s cash and crypto, citing poor internal controls and record keeping. 

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