Monday July 4 2016 Housing and Economic stories

TOP STORIES:

Hard-to-Sell Assets Complicate European Banks’ ‘Brexit’ Risks - (www.nytimes.com) Even before Britain voted to cut ties with the rest of Europe, large European banks with global ambitions and sprawling operations in London were struggling. Now, as banks scramble to assess the impact of a British exit from the European Union, Deutsche Bank, Credit Suisse, Barclays and others face increased pressure from investors. While they recovered some ground on Tuesday, the stock prices of these banks have fallen sharply after the British vote, on increased fears that they will be unable to sell the billions of dollars of derivatives, securitized mortgages and other hard-to-value and sell securities that they so desperately need to get rid of.

Forget December. Forget Next Year. Fed Done Hiking Until 2018 - (www.bloomberg.com) Traders, who have consistently been better at projecting the path of interest rates than the Fed itself, are now pricing in a greater probability that policy makers will cut rates in upcoming meetings than raise them. They don’t assign more than a 50 percent chance of an increase until the beginning of 2018, and don’t price in a full rate hike until the final quarter of the year. The sea change in outlook for central bank policy comes after global equities and commodities plunged while government bonds and the dollar surged following Britain’s vote to quit the European Union. That’s tightened financial conditions in the world’s largest economy, driven down inflation expectations and dimmed the outlook for global growth.

European Commission Prepared to Help Avoid Run on Italian Banks After Brexit – (www.wsj.com) The European Commission will do everything to avoid a run on Italian banks following the turmoil in global markets spurred by the U.K.’s vote to leave the European Union, commission President Jean-Claude Juncker said Tuesday. Speaking at the end of a summit of EU leaders here, Mr. Juncker said he discussed the state of Italian banks with Italian Prime MinisterMatteo Renzi, and that the bloc must make sure that the banking sector in Italy and elsewhere is well protected. “The commission will do everything to avoid any kind of bank run,” Mr. Juncker said. “This is not a danger for Italy for now but we have to make sure given the uncomfortable global circumstances we are in that the banking sector in Italy and elsewhere will be protected in the best way possible.”

NIRP Absurdity Soars after Brexit, Hits $11.7 Trillion - (www.wolfstreet.com) The amount of government bonds that sport negative yields – an all-too-real absurdity where bondholders in effect are shanghaied into paying the government for the privilege of lending it money – has soared 12.5% after the Brexit vote, from $10.4 trillion at the end of May to $11.7 trillion as June 27,Fitch Ratings reported today. The action was in longer-dated bonds, with maturities of 7 years and over. Those with negative yields soared to $2.635 trillion, up 62% from the end of May and up 93% from the end of April, having nearly doubled in two months! The German 10-year yield fell below zero during the period, now at -0.124%. Japanese yields are below zero all the way out to 17 years. And “virtually all” of the Swiss sovereign debt luxuriates in negative yields.

Division, confusion as EU rethinks future without Britain - (www.ap.org) EU leaders are meeting Wednesday without Britain for the first time to rethink their union and keep it from disintegrating after Britain's unprecedented vote to leave — but conflicting visions of Europe's future are complicating the high-stakes summit. British Prime Minister David Cameron left Brussels Tuesday night without any clear divorce plan, fending off pressure for a quick exit and punting the complex departure negotiations to his successor. With Britain's fate in Europe uncertain, the 27 remaining presidents, chancellors and prime ministers meeting in Brussels are focusing Wednesday on what the EU will look like without Britain. They all seem to agree that something must change after Britain quit, but disagree about how. The initial EU founding nations in the west lean toward a tighter, closer union while newer nations in the east want to keep more control with national governments — notably of their borders.

OTHER STORIES:

Merkel Says No Way Back From Brexit as Cameron Regrets Defeat - (www.bloomberg.com)
EU Chiefs ‘Held Hostage’ Tell Cameron to Lay Out Brexit Plan - (www.bloomberg.com)
Moody’s Lowers Outlook on Barclays, HSBC and U.K. Banking System - (www.bloomberg.com)
Oil-rigged states face a full-blown economic budget crisis - (www.cnbc.com)
Russia, United States blame each other for maritime incident - (www.reuters.com)

Sad Cameron blames Brexit on EU migration failure - (www.ft.com)
Brexit: Moody’s lowers UK banks’ outlook to negative - (www.ft.com)
Hollande heightens City Brexit fallout fears - (www.ft.com)