Date: August 16, 2019
U.S. Home Starts Fall on Further Weakness in Apartment Building
“U.S. new-home construction unexpectedly fell in July for a third month on another drop in starts of apartment buildings that masked a gain in single-family units. Residential starts dropped 4% to a 1.19 million annualized rate after a downwardly revised 1.24 million pace in the prior month, according to government figures released Friday. The median forecast in a Bloomberg survey of economists called for a 1.26 million pace. Multifamily home construction slumped for a second month, while starts of single-family housing increased to the highest level since January. The data on single-family homebuilding, bolstered by the highest level of permits in that category since November, suggest homebuilding remains stable in the face of lot and labor shortages. Some builders are trying to alleviate a nationwide deficit of affordable housing as solid wages and low mortgage rates support demand. Total building permits, a proxy for future construction, rose 8.4% to a 1.34 million rate, exceeding estimates. The monthly increase was the largest in more than two years. Data out Thursday showed sentiment among U.S. homebuilders rose in August to match this year’s high, but a weaker outlook suggests upward momentum in the months ahead may prove fleeting. Single-family starts climbed 1.3% to 876,000 annualized rate, and permits rose for a third month. Data out next week are forecast to show existing-home sales, which make up the majority of the U.S. housing market, increased in July while the pace of new home sales eased. Starts for multifamily homes, a category that tends to be volatile and includes apartment buildings and condominiums, decreased 16.2% after a 16.4% decline in June, while permits increased 21.8% last month. Three of four regions posted a decline in starts. The report, produced jointly by the U.S. Census Bureau and the Department of Housing and Urban Development, has a wide margin of error, with a 90% chance that the headline figure was between a 12% decline and 4% increase.”
Trump’s Oil Sanctions Leave Russian Exporters $1 Billion Richer
“U.S. President Donald Trump’s sanctions against Iran and Venezuela have inadvertently increased demand for a Russian brand of crude oil, boosting revenues for the nation’s exporters. Russian oil companies received at least $905 million in additional revenues between November and July, data compiled by Bloomberg show. The calculation is based on difference between the Urals spread to the Brent benchmark over the period compared to the five-year average. The sanctions added to a jump in demand for Russian crude in the wake of output cuts from the Organization of Petroleum Exporting Countries and their partners. As a result, Russia’s Urals blend of crude has started to regularly trade at a premium to Brent. “There is a shortage of competing heavier, sourer crude right now as a result of sanctions on Iran and Venezuela, but also because of OPEC+’s current production cut agreement,” Konstantsa Rangelova, analyst at JBC Energy, said by email. “Urals in the Mediterranean is at an all-time high.” The Bloomberg calculations are based on terminal data, oil loading programs for Russian ports and information from a trader monitoring S&P Global Platts oil assessments. The estimate doesn’t include any of the overall effect on Brent prices from Trump’s policies or the OPEC+ deal, just the shift in relative prices. The U.S. announced sanctions against Venezuela in late January and removed the remaining waivers for buyers of Iranian oil from May. The measure created a shortage of the heavy, sour kind of crude that the two export, a variety similar to that produced in Russia. While this oil is considered to be of lower quality, some refineries are built to process it and switching to other grades is costly. Russia’s total oil export revenues totaled $58.5 billion in the first half of the year, according to the Federal Customs Service. Last year’s revenues reached $129 billion.”
China Preps Tariff Response as Trump Sees a Xi Call ‘Very Soon’
“China called looming U.S. tariffs a violation of accords reached by Presidents Donald Trump and Xi Jinping, vowing retaliation as Beijing also pushed back on Trump’s effort to link the trade war with the turmoil in Hong Kong. Trump on Thursday said he had a call coming soon with Xi. The plans for 10% tariffs on an additional $300 billion in Chinese imports have taken the U.S. and China off the track of resolving their dispute through negotiation, the State Council Tariff Committee, which has overseen tit-for-tat retaliation, said in a short statement on Thursday. China “has no choice but to take necessary measures to retaliate,” it said, without specifying what the nation would do. Separately, a foreign affairs ministry spokeswoman expressed hope that the U.S. would leave Hong Kong as an internal matter for the Chinese government to deal with. Trump said Thursday that an agreement with China has to be on “our terms,” according to Fox Business. The U.S. president later told reporters in Morristown, New Jersey, that he has a call scheduled “very soon” with Xi over trade. “They would like to do something,” Trump said, without elaborating. U.S. stocks finished the day higher after getting whipsawed throughout the session as Treasury yields plummeted to levels unseen in years. Trade headlines set investors on edge, though volatility has gripped markets for most of August since Trump escalated his spat with China. Trump announced the tariffs set for Sept. 1 and Dec. 15. China has halted purchases of agricultural goods and allowed the yuan to weaken. Still, top negotiators held a phone call earlier this week and the U.S. delayed the imposition of some of the new import taxes. Negotiators also agreed to have another call in the coming two weeks and people familiar said earlier the Chinese delegation is sticking to their plan to travel to the U.S. in September for face-to-face meetings.China’s statement indicates that Beijing doesn’t think the U.S. delaying some of the tariffs is enough, said Zhou Xiaoming, a former Ministry of Commerce official and diplomat. China is sticking to the position that no new duties should be imposed at all, he said, adding that China’s retaliation “may not be limited to tariffs.” Hu Xijin, the editor-in-chief of the Communist Party’s Global Times newspaper, echoed that sentiment. He tweeted before the Thursday announcement that China wants both sides to respect the consensus reached when Trump and Xi met in Osaka in June. “I doubt the Chinese side will resume large-scale purchase of U.S. farm goods under the current circumstances,” he said.”
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