Friday August 21 Housing and Economic stories

TOP STORIES:

Watch Out for a Deeper Credit Selloff as Commodity Pain Spreads - (www.bloomberg.com) It’s getting harder to find U.S. credit investments that are insulated from the pain of slumping commodity prices. U.S. companies have generally been reporting lower quarterly earnings, even those outside an oil industry that’s been rocked by the almost 60 percent plunge in crude since last year’s peak. And revenues at most U.S. companies are positively correlated to metal prices, which have sagged in response to cooling growth from Asia to South America, according to Deutsche Bank AG analysts. Those aren’t great signs for investors who’ve bought $9 trillion of dollar-denominated corporate bonds since the end of 2008. But perhaps a worse omen is that investment-grade companies are piling on debt at the fastest pace in at least a decade, boosting such obligations by 17.1 percent versus last year, the analysts wrote in an Aug. 7 report.

Oil collapse couldn't come at worse time for industry - (www.bloomberg.com) The U.S. energy industry was licking its wounds when oil recovered to the $60 level in April. Now, with the price of a barrel back in the $40s, the industry mood is dark, with an outlook for lower oil prices well into next year, meaning more shelved projects, deeper cost cuts and tighter-than-expected funding. Funding is the life blood of U.S. energy supply, as it provides cash flow for an industry that needs to make capital expenditures in order to make money. A cutback in funding could mean less drilling, which is bullish for the price of oil, but negative for companies seeking to generate cash flow. That makes the price of oil the wild card-and all the more important as fall approaches. October is when bank lenders perform a biannual review of the loans and revolving credit they make available to exploration and production companies, particularly those in the high-yield space. But because of the sharp drop in crude prices and weak outlook, banks are looking more broadly at their exposure across the industry. And for a small universe of the riskiest names, credit lines could be reduced or cutoff.

S&P 500 Flouts History in Break With Bonds That Often Ends Badly - (www.bloomberg.com) As far as credit markets are concerned, U.S. stock investors have lost touch with reality. That’s seen in the extra yield bond investors demand over Treasuries. The spread has expanded by 0.48 percentage point from a year ago, the most since 2012, even as the Standard & Poor’s 500 Index rallied. While not without precedent, instances when anxiety in bonds didn’t seep into equities are rare. More than 70 percent of the time since 1996, as spreads widened as much as they have since April, the S&P 500 has fallen, with the average decline exceeding 10 percent, data compiled by Bloomberg show. “This is something that sooner or later is going to impact the stock market,” said Russ Koesterich, global chief investment strategist at New York-based BlackRock Inc., which oversees $4.7 trillion. “Credit market conditions have not been benign and easy as where they were last summer.”

For Norway, Oil at $50 Is Worse Than the Global Financial Crisis - (www.bloomberg.com) Scandinavia's richest nation is facing a mess. When the financial crisis brought the global economy to its knees, Norway was largely unscathed. But oil under $50? That's another story. Unemployment peaked at about 3.7 percent in 2010 in the post-crisis aftermath. Falling oil prices already pushed the jobless rate to 4.3 percent in May, the highest in at least 11 years, and that was before a renewed drop in Brent crude. Here are a few ways it's harder for Norway to deal with plunging oil prices than a global financial meltdown. 

Record $253bn in long-dated debt issued this year - (www.ft.com) International companies and governments worldwide are issuing record sums of long-dated debt as investors bet on decades of low growth and inflation. Exceptionally cheap interest rates on international capital markets as well as plentiful demand for investment assets have encouraged sovereign and corporate borrowers to issue an unprecedented $253bn in long-dated bonds so far this year. That marks a significant jump from the $188bn issued over the same period last year, according to figures from financial data provider Dealogic. The popularity of long-dated debt suggests that investors believe that global growth will stay stagnant, despite burgeoning expectations that central banks in the developed world are poised to raise interest rates as their economies show signs of strength. Markets, however, appear less convinced. In July, the IMF cut its global growth projection for 2015 from 3.5 to 3.3 per cent, although it maintained that drivers for accelerating economic activity, including lower fuel prices and improving labour market conditions, remain intact.

OTHER STORIES:

Russian GDP Plunges 4.6% - (www.bloomberg.com)
China’s Stocks Rise Most in Month Amid SOE Merger Speculation - (www.bloomberg.com)
Germany Cautions on Rushing Into Third Greek Bailout Deal - (online.wsj.com)

This Is What China's Version of Quantitative Easing Looks Like - (www.bloomberg.com)
UBS Wary as China Seeks Global Help to Clean Up Local Debt Mess - (www.bloomberg.com)
Here are the S&P 500 Stocks With the Highest Exposure to China - (www.bloomberg.com)