Weekly IP #12
🏘️ UK house prices fell for a fourth consecutive month in December, according to Nationwide Building Society, marking the longest downturn in property values since the end of the global financial crisis in 2008. Rents in Beijing's office buildings have decreased in Q4 as businesses cut spending amid China's real estate slump, which now extends beyond the residential market's prolonged sales downturn. Pending home sales in the US fell significantly in November, with a 4% drop compared to the expected decrease of 0.8%. Year-over-year sales were down 37.8%. This marks 18 consecutive months of year-over-year declines. The Pending Home Sales Index is now at its lowest level since 2001 (excluding the impact of the COVID-19 pandemic).
🏦 Emerging stress points in credit markets, such as banks with high levels of buyout debt, a UK bond blowup, and real estate issues in China and South Korea, maybe start more problems as cheap money becomes scarce. Distressed debt in the US has risen over 300% in the past year, high-yield issuance has become more challenging in Europe, and leverage ratios are at record levels. Almost $650 billion in bonds and loans globally are in the distressed territory, posing the biggest test of corporate credit since the financial crisis and potentially leading to a wave of defaults.
🧑🏭 In December, initial jobless claims rose by 9,000 to 225,000, while continuing claims were slightly above the estimated 1.68 million at 1.7 million. The 4-week average of jobless claims was mostly unchanged at 221,000, indicating a tight labor market.
📉📈 According to Goldman Sachs analysts, the US will avoid a recession and continue progressing toward a "soft landing". The forecast reflects their view that a period of below-potential growth is enough to gradually rebalance the labor market and dampen wage and price pressures. They also believe that the drag from fiscal and monetary policy tightening will diminish sharply next year, in contrast to the consensus view that the lagged effects of interest rate hikes will cause a recession in 2023. Alongside, the Goldman Sachs CEO announced that the company is planning to make a fresh round of job cuts that are expected to take place in the first half of January. In a message to staff, Solomon stated that "tightening monetary conditions that are slowing down economic activity" are among the factors impacting the business landscape.
🛢️️ China lifted travel restrictions and reopened its borders, leading to a 3% increase in the Hang Seng China Enterprises Index, particularly in tourism and retail shares. But the party's not just for stocks - oil prices could also get a boost, with consumption set to increase by over 1 million barrels per day as travel picks up. Goldman Sachs predicts this could lead to a $15 per barrel price increase. While the impact on transportation and manufacturing costs will vary by country, Europe may feel the most heat. US crude oil inventories decreased by 1.3 million barrels last week. Russia plans to ban exports of oil to buyers enforcing price caps, and there is expected to be heightened volatility due to thin trading during the holiday period.
🥇 Meanwhile, gold prices have soared to their highest level in 6 months as the anticipation of higher demand from China weighs on the dollar. Central banks have been purchasing gold at the fastest rate since 1967 this year, and demand in 2022 has exceeded the demand of the past 55 years. This increased demand is likely due to elevated levels of mistrust, doubt, and uncertainty.
Social Savvy: Harnessing the Wisdom of the Tweeters
The 2022 bear market in context. pic.twitter.com/Oe0LoTDXBR
— Alf (@MacroAlf) December 29, 2022
No, the consumer is not strong. They are actually quite vulnerable. pic.twitter.com/66p30excJz
— Markets & Mayhem (@Mayhem4Markets) December 29, 2022
The slowdown we've seen in housing is the fastest on record: Apollo's Torsten Slok pic.twitter.com/6MK2Pqs9yW
— Lisa Abramowicz (@lisaabramowicz1) December 29, 2022
Americans spent half as much on office supplies as they did a decade ago—a trend accelerated by the covid19 pandemic.
Analysts at Statista, a market forecaster, reckon the market will flatline over the next few years. pic.twitter.com/UBXDXt5AoT— Edmund Simms (@ValuablOfficial) December 18, 2022
US/China decoupling accelerates:
US manufacturing orders in China are down 40 percent, according to @Noahpinion https://t.co/FBSgcVTb2l pic.twitter.com/DGYHx9blx9— Jay Hack (@mathemagic1an) December 27, 2022
That's all for now. We'll be back in your inbox soon with more coverage. Take care!