U.S.:
U.S. Home Starts Climb to Highest Level in a Year, Permits Rise
U.S. new-home construction rebounded in October to the fastest pace in a year, partly reflecting recovery efforts in the hurricane-stricken South, government figures showed Friday. A pickup in permit applications for one- family dwellings indicates building will remain firm in coming months.
Highlights of Housing Starts (October)
- Residential starts rose 13.7% to a 1.29 mln annualized rate (est. 1.19 mln) after upwardly revised 1.14 mln pace in prior month
- Single-family home starts rose 5.3%; multifamily jumped 36.8%
- Permits, a proxy for future construction of all types of homes, rose 5.9% to 1.3 mln rate (est. 1.25 mln) from a 1.23 mln pace
Key Takeaways
The report showed building permits for single-family homes improved in October to an 839,000 annualized pace, the fastest since September 2007. Construction spending, which subtracted from gross domestic product in the second and third quarters, may add to U.S. economic growth in the final three months of 2017 on the heels of rebuilding efforts. New construction in the southern U.S. rose 17.2 percent, the most since January, including the biggest gain for single-family starts since July 2014. Areas in the South were hit particularly hard in September by hurricanes Harvey and Irma, which caused flooding and delayed beginning home construction. Activity typically rebounds in later months as rebuilding efforts begin in the affected regions. A gauge of homebuilders’ confidence surged in November to an eight-month high, indicating optimism about the outlook amid sustained demand, boosted by the steady job market and relatively low mortgage costs.
Asia:
China sets sweeping new rules to regulate $15 trillion asset management products
China’s central bank on Friday issued sweeping guidelines to tighten rules on asset management business, the latest step by Beijing to fend off systemic risks in the country’s rampantly growing shadow banking sector. The guidelines unified rules covering asset management products issued by banks, trust firms, insurance asset management companies, securities firms, funds and futures companies, the People’s Bank of China (PBOC) said in a joint statement with the banking, insurance, securities and foreign exchange regulators. At the end of 2016, the collective outstanding volume of their asset management business was 102 trillion yuan ($15.38 trillion), including 29 trillion yuan of bank wealth management products and 17.5 trillion yuan in trust products, according to the PBOC. The new rules aim to close loopholes that allow regulatory arbitrage, reduce leverage levels to curb asset price bubbles and rein in shadow banking activity. The new rules will set leverage limits for asset management products. They will cap the total assets to net assets ratio at 140 percent for open mutual funds and 200 percent for private funds. Investors will be prohibited from pledging their shares in asset management products as collateral to obtain financing, a practice that would increase leverage.
Europe:
German Bund yields set for biggest weekly fall since ECB meeting
Borrowing costs in Germany were set on Friday for their biggest weekly fall since the European Central Bank’s meeting three weeks ago sparked a sharp rally across euro zone bond markets. After a heavy selloff at the tail end of last week, buying of euro zone bonds has resumed this week, with safe-haven German debt boosted by selling of risk assets and a fall in oil prices which has weighed on investors’ inflation expectations. Oil prices were set for their first weekly fall in six weeks, under pressure from surging U.S. supplies and doubts over Russian support for continuing a cut in crude output. German 10-year Bund yields were steady at around 0.38 percent in early Friday trade, in line with their euro zone peers. They have fallen almost 4 basis points this week, however, the biggest weekly fall since Oct. 26, when the ECB extended its asset-purchase scheme well into 2018, albeit at a reduced pace, cheering bond markets where the bank’s ultra-loose monetary policy has pinned down borrowing costs. “Yields have moved to the downside again this week driven by some investors taking the opportunity to buy bonds after the selloff last week,” said DZ Bank rates strategist Daniel Lenz.
