Friday July 8 2016 Housing and Economic stories

TOP STORIES:

Standard Life suspends trading in UK property fund - (www.bbc.com) Standard Life Investments has suspended trading in its UK property fund blaming "exceptional market circumstances" following the EU referendum result. The fund manager said the number of investors asking to withdraw their money had increased following the vote. "The suspension was requested to protect the interests of all investors in the fund," it said in a statement. The last time Standard Life stopped investors taking their money out of the fund was during the financial crisis. The £2.9bn fund invests in a mixture of commercial real estate in the UK, including office blocks, shopping centres and warehouses. The move comes after Standard Life Investments, the insurer's fund management arm, wrote down the value of the fund by 5% last week, saying the Brexit vote had "negatively impacted" valuations for UK commercial property. It said the suspension would end "as soon as practicable" and it would review the decision every 28 days.

EU, Italy weigh public recapitalization of banks before stress tests - (www.reuters.com) Italy is in talks with the European Commission to devise a plan to recapitalize Italian lenders with public money limiting losses for bank investors, an EU executive spokeswoman said on Sunday. The move would aim to help Italian lenders at risk of failing the last round of European stress tests, for which results are due on July 29, as they face a collapse in share prices and remain saddled by a mountain of bad loans that make up roughly one-third of the euro zone's total. "We are in contact with the Italian authorities," a Commission spokeswoman said when asked whether Rome and the EU executive were holding talks on a possible public recapitalization of Italian banks.

Investor Fears Spike as Italy (and the EU) Inch Closer to Doomsday Scenario - (www.wolfstreet.com) Just how low can Italian bank shares go? That’s the question plaguing the minds of European investors, policy makers, bankers and central bankers. Today the shares of the country’s third largest publicly traded bank, Monte Dei Paschi, plunged 14% to €0.33, their lowest point ever. Two years ago, they ran between €5 and €9. The reason for the latest plunge was news that the ECB had sent the bank a letter urging it to draw up a plan for tackling its bad-loan burden. The lender is being asked to reduce its load of curdled debt by €10 billion to €14.6 billion by 2018. That’s a big ask even in the best of times, and these are certainly not the best of times for Monte Dei Paschi. According to Bloomberg, its loan loss provisions would represent over 95% of its operating profits.

After Losing $100 Billion On Terrible Stock Investments, The World's Largest Pension Fund Is Doubling Down - (www.zerohedge.com) Back in December 2014, when we first learned that Japan was willing to risk hundreds of billions in Japanese pensions to boost and prop up the domestic stock market - the only true ""arrow of Abenomics - by shifting cash out of bonds and into stocks in the country's gargantuan (and world's biggest) $1.4 trillion Government Pension Investment Fund, or GPIF, we wrote that "The GPIF Has A Warning For Japan's Citizens: Abenomics Better Work, Or Your Pensions Are Toast." As the WSJ wrote then, "Japan’s $1.1 trillion government pension fund is betting that a long-term recovery and rising corporate profits will push Tokyo stock prices higher, helping the fund increase returns for the nation’s retirees. Mr. Abe has pushed for the fund to become a more aggressive and sophisticated investor. The fund decided in October to shift its portfolio to seek higher returns, slashing its target allocation to domestic bonds almost in half while nearly doubling that of domestic and foreign equities."

Bad Debt Piled in Italian Banks Looms as Next Crisis  - (www.wsj.com) Britain’s vote to leave the EU has produced dire predictions for the U.K. economy. The damage to the rest of Europe could be more immediate and potentially more serious. Nowhere is the risk concentrated more heavily than in the Italian banking sector. In Italy, 17% of banks’ loans are sour. That is nearly 10 times the level in the U.S., where, even at the worst of the 2008-09 financial crisis, it was only 5%. Among publicly traded banks in the eurozone, Italian lenders account for nearly half of total bad loans. Years of lax lending standards left Italian banks ill-prepared when an economic slump sent bankruptcies soaring a few years ago. At one major bank, Banca Monte dei Paschi di Siena SpA, bad loans were so thick it assigned a team of 700 to deal with them and created a new unit to house them. Several weeks ago, the bank put the bad-credit unit up for sale, hoping a foreign partner would speed the liquidation process.

OTHER STORIES:

Brexit Has Euro Outsiders Fearing Banking Fallout, Denmark Says - (www.bloomberg.com)
Top candidates to lead Britain differ on how quickly to start Brexit talks - (www.reuters.com)
China to hold drills in South China Sea ahead of court ruling - (www.reuters.com)

Asian Stocks Retreat After Weekly Gain as Japan Shares Decline - (www.bloomberg.com)

Renzi ready to defy Brussels and bail out Italy’s troubled banks - (www.ft.com)
Carney Set to Extend BOE Crisis-Management Mode Using New Tools - (www.bloomberg.com)
China’s private sector misses out on credit boom - (www.ft.com)