Daily Market Commentary for August 22, 2011
Gold at $1900 an ounce, well almost. (read more at Millennium-Traders.Com) http://www.millennium-traders.com/news/newscommentary.aspx
Anticipation is high on Friday as Federal Reserve Chairman Ben Bernanke is expected to use his highly anticipated speech from Jackson Hole, Wyoming to stress that he is willing to ride to the rescue to stabilize the economy. Due to the financial markets volatility, what Bernanke actually says during the speech will be dependant upon the state of markets Friday morning. Bernanke may use the speech to go through available policy options, which would be remarkably similar to his speech at Jackson Hole conference, a year ago. Bernanke is likely to discuss is a move to lengthen the maturity of its balance sheet this would be designed to lower long-term rates. The Fed could possibly reduce the interest it pays to banks for excess reserves to zero from 0.25% however; economists believe the action may have unintended consequences in the short-term money markets.
The Federal Reserve Bank of Chicago's national activity index improved to negative 0.06 in July from negative 0.38 during June. The gain was led by improvements in production-related indicators. A three-month average of the Chicago Fed's national index of economic activity rose to a negative 0.29 from negative 0.54 in June.
During Q2, mortgage delinquencies rose - a reflection of the deterioration of the job market. The delinquency rate for mortgages on one-to-four unit residential properties reached a seasonally adjusted 8.44%, up from 8.32% in Q1, yet still down from 9.85% when compared with Q2 2010. "While overall mortgage delinquencies increased only slightly between the first and second quarters of this year, it is clear that the downward trend we saw through most of 2010 has stopped. Mortgage delinquencies are no longer improving and are now showing some signs of worsening," Jay Brinkmann, chief economist of the MBA said in a news release. The percentage of mortgages entering the foreclosure process was 0.96% in Q2, the lowest level seen since 2007; down from 1.08% in Q1 and 1.11% in Q2 of 2010. The percentage of mortgages in the foreclosure process was 4.43% at the end of Q2, down from 4.52% in Q1 and 4.57% in Q2 of 2010. “Foreclosure start rates fell to their lowest level since the fourth quarter of 2007. Foreclosure inventory rates also fell, to their lowest level since the third quarter of 2010. While some have argued that this drop in foreclosures is a temporary drop which does not reflect the problems yet to come, this does not appear to be the case, at least at the national level,” Brinkmann said. “There are still many problem loans that need to be resolved, but the idea that there is a growing backlog of loans being held back from foreclosure is simply not supported by these numbers.”
Equipment Leasing and Finance Association [ELFA] survey showed a decrease in loan and leasing activity for capital equipment - attributed to the weak U.S. economy. Positive note - delinquent loans and leases are down from a year ago, but up from June survey. Financing volume for business equipment grew less than 2% during July compared to same month in 2010, as a monthly survey of banks and finance companies showed lending activity that's consistent with a weakening U.S. economy. Respondents to ELFA survey reported they financed $5.7 billion of new equipment in July, compared with $5.6 billion in 2010 for same period. The number is actually lower by 22% from June's volume of $7.3 billion. From January through July, survey respondents provided financing for $38.2 billion of equipment purchases, up 23.6% from the same period in 2010. In July, credit standards tightened as the approval rate for loans and leases fell to 76.3% of applications from 78.7% in June. Of the companies participating in the survey, 59% reported that they submitted more transactions for approval during the month, down from 63% in June. Loan portfolio quality indicators in the survey were mixed for July which suggests the industry continues to overcome the bad loans and the tenuous credit worthiness of some loan applicants. Loans and leases that are past due by more than 30 days accounted for 2.7% of survey respondents' net receivables during July, down from 3.4% a year earlier, but up from 2.5% in June. Loan charge-offs amounted to 0.7% of respondents' net receivables in July, down from 1.4% in July 2010 and 1.1% in June.
It appears Moammar Gadhafi is no longer in charge of the Libyan people. It is anticipated that it may take approximately one month to see the oil once again, flowing from Libya. European Brent crude oil, declined today on hopes Libya’s production would be back on line. Prior to the uprising in Libya that began nearly 5 months ago, Libya produced nearly 1.6 million barrels of oil a day, of which about 1.3 million was exported, mainly to refineries in southern Europe. WTI is lighter and 'sweeter' therefore, is less costly to refine into gasoline and other higher-value energy products. WTI had historically traded a few dollars per barrel - higher than Brent, the North Sea blend traded on London’s ICE Futures Exchange.
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