The Organisation for Economic Cooperation and Development forecast that global growth would slow from 3.7 percent this year to 3.5 percent in 2019 and 2020. The global growth slowdown would be worst in non-OECD countries, with many emerging-market economies likely to see capital outflows as the U.S. Federal Reserve gradually raised interest rates. The OECD cut its outlook for countries at risk such as Brazil, Russia, Turkey and South Africa.
The National Association of Home Builders/Wells Fargo Housing Market Index dropped eight points in November to 60, the lowest level since August 2016, according to a report Monday. A housing slowdown may have implications for how far the central bank will extend its run of eight interest-rate hikes since late 2015. The Fed is expected to raise interest rates in December and will also update projections that in September showed a median outlook of three quarter-point hikes next year.
Financial stocks are often spotlighted as major beneficiaries of rate increases, but this is a misconception. Gradual rate hikes over long periods are, in fact, good for banks. Because while rising rates mean banks can charge more for loans, they have an adverse effect on the price of fixed-income securities like bonds, which make up the bulk of banks’ assets.
The Fed won't end up raising interest rates as aggressively as projected, says the editor of the Grant's Interest Rate Observer newsletter.
Companies are carrying a $9 trillion debt load, posing a potential threat should rates continue to rise and the economy weaken. A principal worry is over companies teetering between investment grade and junk that could cause market trouble should their standing deteriorate. At first glance, it looks like a $9 trillion time bomb is ready to detonate, a corporate debt load that has escalated thanks to easy borrowing terms and a seemingly endless thirst from investors.
With no major move in interest rates and continued weakness in home affordability, there was not a lot of incentive for homebuyers to make a move last week, and there was even less for homeowners looking to save money on their mortgages. Total mortgage application volume moved 0.1 percent lower last week from the previous week, according to the Mortgage Bankers Association. Volume was 22 percent lower than a year ago.
Cratering stocks won't be enough to change the central bank's mind, says Goldman Sachs. The central bank is expected to raise rates once more this year and at least three times in 2019. Some have suggested the Fed will blink when evidence of a slowing U.S. economy materializes.
At the same time, the central bank will want to reassure markets that it has not given up on the idea of normalizing policy, given increasing public attention to the plight of regional banks, though it will likely temper any expectations about an imminent move. The complicated mix of policy debates creates a communication challenge for the BOJ as it balances the merits and costs of its massive stimulus, which has failed to fire up inflation. "Coming up with the best policy mix is becoming increasingly difficult." Markets have been rife with speculation the BOJ could raise rates to give some breathing space to regional banks, which have seen profits squeezed by years of near-zero rates, a dwindling population and falling number of borrowers.
The real estate market was red-hot for years, as Americans could get mortgages for next to nothing. Homebuilders have been some of the hardest-hit stocks as a result of the rising interest rates, and the majority of homebuilding and construction ETFs are in the bear market territory—which means they are down more than 20% from their highs. While some observers might believe the hard-hit homebuilder stocks represent attractive long-term investments today, the continued threat of rising interest rates could very well send these stocks even lower.
U.S. listed tech stocks extended their slump in pre-market trading Tuesday, with each of the so-called FAANG names sliding into bear market territory after giving back nearly $1 trillion in value from their recent peaks amid persistent concerns over waning consumer demand, U.S.-China trade talks and rising interest rates. "Trade war concerns with China weigh on the global supply chain for large technology companies while global growth fears worry many that future earnings will be lower," said Chris Zaccarelli, chief investment officer at the Independent Advisor Alliance.
(Bloomberg) -- Emerging-market central bankers are taking stronger steps to rein in current-account deficits, even though they say the attention the market puts on this metric is all a bit unfair.
The Bank of Canada will likely holster its “guns blazing” approach to rising interest rates in December as heavy crude prices crater and previous hikes impact the economy earlier than expected, according to economists at CIBC.
Two-thirds of U.S. corporate decision-makers have not locked in favorable rates to mitigate their interest rate and foreign exchange exposure, a decision that can cost their firms millions of dollars, according to a survey released today by Citizens Bank. The Citizens Market Insights Survey of more than 300 corporate leaders finds that 70 percent of U.S. corporate leaders have not locked in lower interest rates despite signs that rates will continue to increase and 67 percent have not used a hedging strategy to mitigate their exposure to fluctuations in the value of the U.S. dollar.