Daily Market Commentary for October 25, 2011
Consumer confidence dropped to lowest level seen since March of 2009, as consumers became more pessimistic about both current and future conditions during the month of October, with worse expectations and views on the current economy, per the Conference Board today.
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For the fifth consecutive monthly gain, U.S. home prices edged higher in August. The S&P/Case-Shiller 20-city composite rose 0.2% on the month to narrow year-on-year declines to 3.8%. The data adds to a perception of a housing market that is stabilizing both in terms of transactions and prices, at low levels. Home prices are 31% below their peak according to Case-Shiller, while the number of existing-home sales transactions is approximately 30% below its peak, according to a separate report from the National Association of Realtors. “With 16 of 20 cities and both Composites seeing their annual rates of change improve in August, we see a modest glimmer of hope with these data,” said David Blitzer, chairman of the index committee at S&P Indices. Blitzer additionally said that the data from the Midwest “really stands out” as Chicago, Detroit and Minneapolis have all posted very sharp monthly increases going back to May. The Case-Shiller data covers transactions from June, July and August.
According to the Federal Housing Finance Agency, U.S. home prices slipped 0.1% on a seasonally adjusted basis in August to drag the yearly decline to 4%. July's data from the FHFA was sharply revised lower to a no-change reading from an initial 0.8% gain. The FHFA monthly index is calculated using purchase prices of houses backing mortgages, excludes jumbo loans, that have been sold to or guaranteed by Fannie Mae or Freddie Mac.
The Richmond Federal Reserve released its manufacturing index was unchanged in October at -6, as shipments and plans for hiring fell. The new orders gauge rose 12 points to finish at -.5. Two months ago, the Richmond Fed's index hit its lowest level since June 2009. The Richmond Fed is a diffusion index, calculated by subtracting the percentage of respondents who say activity has dropped from those who say it has increased.
Charles Collyns, Treasury assistant secretary for international finance reported today that Europe must move "quickly and firmly" to implement any agreement to solve the euro-zone crisis. In testimony prepared for a House Financial Services subcommittee on international matters, Collyns said that that the European officials have a framework for an agreement which is to be "finalized" on Wednesday. Experts on both sides of the Atlantic are concerned that the leaked details of the agreement fall short of solving the crisis. For instance, there are reports that the plan calls for European banks to raise reserves by 100 billion Euros. Overseas, German Chancellor Angela Merkel voiced opposition to a portion in the draft from the European Union summit that called for backing the ongoing use of non-standard measures or by the European Central Bank buying of bonds in the secondary market. The European finance ministers' portion of the summit was cancelled.
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