Tuesday April 19 2016 Housing and Economic stories

TOP STORIES:

Soured Corporate Loans Surge at Biggest U.S. Banks on Oil - (www.bloomberg.com)  Soured loans to companies jumped 67 percent at the three biggest U.S. banks in the first quarter, the latest sign that corporate credit quality is eroding after energy prices plunged. At Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co., bad loans to companies reached their highest levels since at least 2013. For now, weakness is mainly confined to oil and gas and related industries, executives said. U.S. crude has tumbled more than 60 percent since June 2014, although they have rallied since February. Troubled loans have broadly been declining at big banks for years, and at JPMorgan and Bank of America, are less than 1 percent of total assets. But there are signs that default risk is rising in sectors outside of energy, including health care, James Elder, a director in corporate and financial institutions at Standard & Poor’s, said in a presentation this week.

China May Have $1.3 Trillion of Risky Loans, IMF Report Shows - (www.bloomberg.com)  China may have $1.3 trillion loans extended to borrowers that don’t have sufficient income to cover interest payments, with potential losses equivalent to 7 percent of the country’s gross domestic product, according to the International Monetary Fund. Loans “potentially at risk” would amount to 15.5 percent of total commercial lending, the IMF said in its latest Global Financial Stability Report. That compares with the 5.5 percent problem loan ratioreported by China’s banking regulator after including nonperforming and special-mention loans. The true amount of bad debt sitting on the books of China’s banks is at the center of a debate about whether the country will continue as a locomotive of global growth, or sink into decades of stagnation like Japan after its credit bubble burst. Hayman Capital Management’s Kyle Bass in January flagged a $3.5 trillion potential loan loss for China banks, though analysts from China International Capital Corp. and Macquarie Securities Ltd. have said that estimate overstates the real situation.

It’s Gotten So Bad in Europe, Even Eurocrats Begin to Worry - (www.wolfstreet.com)  You know that things are bad when even the firmest believers begin questioning their faith. That’s what’s starting to happen in Europe, where the EU faces a dizzying constellation of threats and challenges and even the staunchest of eurocrats are beginning to express doubts. Many people have lost trust in “entire institutions, whether national or European,” laments European Parliament Chief Martin Schulz. In an interview with the Frankfurter Allgemeine, he warned over a possible “implosion of the EU” due to the blossoming Euroskeptic movements in member states. The main reason for Schulz’s gloomy disposition is the Dutch referendum vote last week against an EU-Ukraine trade agreement.

Buyback boost to US stocks to dwindle as cash flow shrinks - (www.reuters.com) The S&P 500 is close to its record high as earnings season heats up, but one of the major drivers of the market's advance - stock buybacks - looks to be sagging. U.S. companies announced about $182 billion in buybacks in the first quarter, according to Birinyi Associates research, putting buybacks on pace for their weakest year since 2012. Strategists link this, in part, to falling cash flow, a trend that is expected to worsen in coming quarters. First-quarter earnings per share are expected to fall 7.8 percent, but more importantly for the outlook for buybacks, revenues are set for a fifth consecutive quarter of decline. Thomson Reuters data forecasts a 1.1 percent revenue drop.

China Averts a Hard Landing With a Credit-Powered Trampoline - (www.bloomberg.com) So much for the hard landing scenario. Chinese leaders appear to have stabilized their $10 trillion-plus economy by relying on a tried and true playbook: unleash a torrent of credit to power a borrowing surge and spending splurge. The flood of money has helped house prices rebound, spurred investment, stabilized markets and buoyed consumers. It also ensured that gross domestic product in the first quarter came in at a 6.7 percent gain from a year earlier, matching expectations and well within the government’s 2016 target of 6.5 percent to 7 percent. It’s all a world away from the start of the year, when stock markets reeled in Shanghai and Shenzhen and investors around the world were baffled by currency policy and the direction of the yuan. In January, what looked like a decelerating and unstable China loomed as a negative for the global economy and all manner of commodities, from copper to crude oil. That’s no longer the case, at least for now.

OTHER STORIES:

Financial shares mint fifth day of gains; indexes close flat - (www.reuters.com)
Investors Pour $10.7 Billion Into Junk Bonds as Fears Fade - (www.bloomberg.com)
'Let them sell their summer homes': NYC pension dumps hedge funds - (www.reuters.com)
Policymakers fret as storm clouds gather over world economy - (www.reuters.com)

Most Americans think economy is 'getting worse' - (www.cnbc.com)
China says enhanced U.S.-Philippine military ties invoke 'Cold War mentality' - (www.reuters.com)

Brazil’s Economy Tanks as Political Upheaval Looms - (online.wsj.com)
Japan Inc. Profits Head for Biggest Abe-Era Drop on Stronger Yen - (www.bloomberg.com)