2023-12-22 16:05

WASHINGTON, Dec 22 (Reuters) - Sales of new U.S. single-family homes dropped to a one-year low in November, but the unexpected decline is probably temporary amid a chronic shortage of previously owned homes, which has been supporting demand for new construction. New home sales decreased 12.2% to a seasonally adjusted annual rate of 590,000 units last month, the lowest level since November 2022, the Commerce Department's Census Bureau said on Friday. October's sales pace was revised lower to 672,000 units from the previously reported 679,000 units. Economists polled by Reuters had forecast new home sales, which account for 13.4% of U.S. home sales, rebounding to a rate of 685,000 units. New home sales are counted at the signing of a contract, making them a leading indicator of the housing market. They, however, can be volatile on a month-to-month basis. Sales increased 1.4% on a year-on-year basis in November. Monthly sales rose in the Northeast and the Midwest. They tumbled in the densely populated South and the West. The supply of previously owned houses on the market remains well below the nearly 2 million units before the COVID-19 pandemic, according to the National Association of Realtors, which this week reported a modest rise in home resales in November. The rate on the popular 30-year fixed-rate mortgage averaged 6.67% this week, the lowest level since June and down from 6.95% in the prior week, according to data from mortgage finance agency Freddie Mac. It has tumbled from a 23-year high of 7.79% in late October, tracking the decline in U.S. Treasury yields. That should help to stimulate home sales next year. The median new house price in November was $434,700, a 6.0% decline from a year ago as builders lower prices to woo buyers. But house prices are probably not falling by that much, with other measures showing strong gains. The bulk of the houses sold last month were in the $300,000 to $749,000 price range. There were 451,000 new homes on the market at the end of November, up from 440,000 in October. At November's sales pace it would take 9.2 months to clear the supply of houses on the market, up from 7.9 months in October. https://www.reuters.com/markets/us/us-new-home-sales-fall-one-year-low-november-2023-12-22/

2023-12-22 15:02

OTTAWA, Dec 22 (Reuters) - The Canadian economy's soft patch continued for the third straight month in October and a modest growth forecast for November will further support investors bet for an interest rate cut in the first quarter of next year, economists said. Latest data released by the Statistics Canada data on Friday showed that the Canadian economy was unchanged in October, while analysts polled by Reuters had forecast a 0.2% month-over-month rise. September's GDP was downwardly revised to zero growth from an initial report of 0.1% growth. The last big data release in Canada for 2023 paints a picture of an economy stuttering under the impact of the Bank of Canada's (BoC) 10 rate hikes between March 2022 and July, which took the benchmark interest rate to a 22-year high of 5%. GDP unexpectedly declined in the third quarter, and the central bank expects growth to remain weak for a few quarters. While the central bank has maintained that it is too soon to forecast rate cuts, money markets expect interest rates to start coming down in April. Following Friday's data, money markets still see a roughly 25% chance of a rate cut in January and a 50% chance of a move in March. A cut is fully discounted for April. "It fits with the very slow growth narrative that we've seen unfolding," said Andrew Kelvin, chief Canada strategist at TD Securities. "From a monetary policy standpoint, the bank has already hit the threshold required for easing to support growth. It really is just a question of when the inflation profile comes a little closer to their targets." Canada's annual inflation rate held steady at 3.1% in November, above the central bank's 2% target. The bank expects inflation to cool to 2.5% by the end of 2024 and returning to the 2% target by the end of 2025. Governor Tiff Macklem in an interview aired on BNN TV on Monday said that the bank could start cutting rates next year as long as core inflation comes down as predicted. In a preliminary estimate for November, Statscan said GDP was likely up 0.1%, helped by increases in manufacturing, transportation and warehousing, and agriculture, forestry, fishing and hunting. Royce Mendes, managing director and head of macro strategy at Desjardins, in a note said that the uptick in November wasn’t enough to suggest that the economy was turning a corner. "As more households and businesses feel the impacts of higher interest rates in 2024, we expect Canada to fall into at least a mild recession. So while the economy is sputtering now, it might begin rolling backwards early in the new year," Mendes added. The Canadian dollar was trading 0.2% higher at 1.3256 per U.S. dollar, or 75.44 U.S. cents, its strongest level in nearly five months, as the greenback lost ground against a basket of major currencies. Contraction in wholesale trade and manufacturing sectors weighed on the economy in October. It was the fourth decrease in the manufacturing sector in the past five months and the second consecutive decline in wholesale trade. Overall, Canada's goods-producing sector was marginally down, while the services sector posted a 0.1% increase. The BoC will release fresh economic projections along with its next rate announcement on Jan. 24, after the release of jobs and inflation data for December. https://www.reuters.com/markets/canadas-economy-stalled-again-october-likely-up-01-november-2023-12-22/

2023-12-22 14:50

NEW YORK, Dec 22 (Reuters) - A year-end rally in U.S. government bonds has potentially limited further gains in some Treasury maturities, said Rick Rieder, chief investment officer of global fixed income at BlackRock (BLK.N), the world’s largest asset manager. U.S. Treasuries have bounced back from a severe sell-off over the past two months on expectations the Federal Reserve will start cutting interest rates next year as inflation cools and the economy slows. But market bets that the Fed will trim rates by 150 basis points starting as soon as March are overdone, Rieder said in an interview. The Fed’s economic projections, published earlier this month, projected 75 basis points of interest rate cuts next year. "To achieve what the market is pricing in, you'd have to have a pretty significant deterioration in some of the indicators like labor, and we don't we don't anticipate that," he said. "I think there's been this persistent skepticism about the U.S. economy, which I think is overdone." Rieder believes that Treasuries at the extreme short and long ends of the yield curve are unlikely to see more meaningful gains after their rapid appreciation of the last several months. "Much of the 2024 return for the very front end and for the very back end, I think, has already been achieved," he said. Benchmark 10-year Treasury yields, which move inversely to prices, have declined from over 5% in October to less than 3.9% this week, and 30-year bond yields have fallen by about 100 basis points from their October highs. Rieder expects rate cuts of 75 to 100 basis points next year starting in May. Certain parts of the Treasury curve, such as bonds with five- or seven-year maturities, are set to benefit the most from the cuts, with five-year yields possibly declining by 50 basis points or more, he added. He has moved the interest rate exposure of the BlackRock Flexible Income ETF (BINC.P) away from short-term debt and more into the so-called belly of the Treasury curve. The duration of the BlackRock Total Return ETF (BRTR.O), which he also manages and which was launched last week, is of about six years, he said. https://www.reuters.com/markets/us/bond-investors-may-be-betting-too-aggressively-2024-rate-cuts-says-blackrock-2023-12-22/

2023-12-22 14:09

WASHINGTON, Dec 22 (Reuters) - Orders for long-lasting U.S. manufactured goods surged in November, boosted by aircraft bookings, but business spending on equipment appeared lackluster amid higher borrowing costs. The Commerce Department's Census Bureau said on Friday that orders for durable goods, items ranging from toasters to aircraft meant to last three years or more, jumped 5.4% last month. Data for October was revised higher to show orders falling 5.1% instead of 5.4% as previously reported. Economists polled by Reuters had forecast durable goods orders rebounding 2.2%. Orders increased 4.5% on a year-over-year basis in November. Manufacturing, which accounts for 10.3% of the economy, continues to be hamstrung by higher interest rates. Despite an easing in financial conditions and prospects of rate cuts next year, activity is likely to remain tepid amid signs that businesses are throttling back on inventory accumulation in anticipation of softer demand. Transportation equipment orders rebounded 15.3% last month after declining 13.4% in October. Motor vehicle and parts orders rebounded 2.8% as strikes by the United Auto Workers ended. Civilian aircraft orders soared 80.1%. Boeing (BA.N) reported on its website that it had received 114 orders for civilian aircraft, 90 of them the more expensive 777X series. That compared to 123 orders in October. There were increases in orders for electrical equipment, appliances and components, primary metals, machinery as well as computers and electronic products. Non-defense capital goods orders excluding aircraft, a closely watched proxy for business spending plans, rebounded 0.8% after a downwardly revised 0.6% drop in the prior month. These so-called core capital goods orders were previously reported to have declined 0.3% in October. Core capital goods shipments dipped 0.1% for a second straight month. Shipments of non-defense capital goods increased 0.5% following a 0.3% drop in the prior month. These shipments feed into the calculation of equipment spending in the gross domestic product report. Business spending on equipment spending contracted in the third quarter. The economy grew at a 4.9% annualized rate last quarter. https://www.reuters.com/markets/us/us-durable-goods-orders-surge-november-aircraft-2023-12-22/

2023-12-22 13:02

Interest rates seen ending 2024 at 12% Rouble seen at 100 vs dollar in 12 months Economic growth seen slowing to 1.1% in 2024 Inflation expected to end 2024 at 5.4% Dec 22 (Reuters) - Russia's economic growth is set to slow in 2024, hampered in particular by double-digit interest rates throughout the year as the Bank of Russia seeks to subdue stubbornly high inflation, a Reuters poll showed on Friday. Russia's gross domestic product is expected to outperform early expectations and grow 3.1% this year, the average prediction of 15 analysts and economists polled by Reuters showed, rebounding from a 2.1% contraction in 2022. But in 2024, growth, which has been boosted this year by soaring government spending, particularly on increased military production, is expected to slow to 1.1%. High interest rates are weighing on growth prospects. The Bank of Russia raised its key interest rate to 16% last week and though it said the rate hiking cycle was near completion, borrowing costs are set to remain elevated for several quarters. "The rate is now, of course, prohibitive," said German Gref, CEO of dominant lender Sberbank (SBER.MM), planning for rates still above 10% at the end of next year. "It has sharply reduced not only corporate lending, but even consumer lending." The poll showed analysts expect rates at 12% by end-2024. "We believe the opportunity to lower the key rate will only open up in the middle of next year, when inflation will steadily slow down," said Mikhail Vasilyev, chief analyst at Sovcombank. Inflation, which the central bank targets at 4%, is seen ending this year 7.6% and slowing to 5.4% by end-2024. Soaring prices for eggs led President Vladimir Putin to issue a rare apology last week, as the country's poorest struggle with painful price increases. Inflation is one of several economic challenges facing Putin as he seeks re-election in March, although Russia's success in evading a Western oil price cap is helping ease the burden. The rouble's weakness has fuelled inflation this year and analysts give the Russian currency slim hopes of strengthening meaningfully in 2024, expecting the rouble to trade at 100 to the dollar a year from now, slightly weaker than in last month's poll. The rouble traded close to 92 on Friday. "We believe the rouble will strengthening against major currencies in January due to the seasonal decline in demand for foreign currency at the start of the year," Vasilyev said, then anticipating steady depreciation. https://www.reuters.com/markets/europe/russias-economic-growth-slow-2024-high-interest-rates-linger-2023-12-22/

2023-12-22 12:33

Dec 22 (Reuters) - U.S. equity funds saw significant outflows in the week ended Dec. 20, as investors took profits ahead of a key U.S. inflation report and as enthusiasm over potential rate cuts diminished. Investors withdrew a net $10.45 billion from U.S. equity funds during the week, the largest weekly net selling since Sept. 27, as they reassessed their portfolios after a solid rally on Wall Street. The S&P 500 (.SPX) dropped 1.47% on Wednesday, facing resistance near its Jan. 4, 2022, record high of 4,818.62. Despite the recent decline, the index has still gained approximately 15.7% since bottoming out at a five-month low of 4,103.78 on Oct. 27. U.S. personal consumption data (USPCEM=ECI) for November is due at 1330 GMT. It could potentially shape expectations for how quickly interest rates might fall in 2024. U.S. equity value funds saw their first weekly outflow in four weeks, worth about $5.88 billion. Investors also sold roughly $11.31 billion worth of growth funds on a net basis. Among sector funds, the tech sector saw $1.08 billion worth of net selling, the second weekly outflow in seven weeks. Financials and gold & precious metal funds also lost about $200 million each in outflows. Industrials, meanwhile, received $336 million worth of inflows, the most in nine weeks. U.S. investors also liquidated $7.55 billion worth bond funds, extending outflows into a fourth successive week. U.S. short/intermediate government & treasury funds logged about $5.1 billion worth of net selling, their seventh weekly outflow in a row. Investors also pulled a net $4.91 billion out of general domestic taxable fixed income funds but poured $1.42 billion into short/intermediate investment-grade funds. U.S. money market funds, meanwhile, suffered $25.54 billion worth of net selling, the biggest outflow in a week since Oct. 18. https://www.reuters.com/markets/us-equity-funds-see-big-outflows-profit-taking-ahead-inflation-report-2023-12-22/