Thursday August 4 2016 Housing and Economic stories

TOP STORIES:

Saudis Slash Oil Prices For Asian Markets; So Much For Solving That Banking Liquidity Crisis - (www.zerohedge.com) Shortly after we spoke yesterday about the banking liquidity crisis in Saudi Arabia caused by the "Saudi circ ref" (low oil prices -> budget deficits -> more oil pumping -> even lower oil prices), almost on cue, the state-owned Saudi Aramco, the worlds largest oil exporter, announced the largest price cut for Arab light sweet crude sold into Asian markets in 10 months.  Aramco priced September exports to Asia $1.10 per barrel below regional benchmarks which is a $1.30 cut vs. August pricing.  Oil pricing into Asian markets has come under intense pressure in 2016 as the battle for market share has intensified between the Saudis, Russians and Iranians (a topic we've covered extensively here, here and here).

Monte Paschi Capital Wiped Out in European Bank Stress Test - (www.bloomberg.com) The world’s oldest bank is also Europe’s riskiest. Italy’s Banca Monte dei Paschi di Siena SpA was the only one of 51 lenders tested by European regulators to have its capital wiped out in the exam’s toughest scenario. The bank, which has been bailed out twice by the government since 2009, said it plans to sell as much as 5 billion euros ($5.6 billion) of stock if it can offload a bad-loan portfolio. The European tests released Friday showed that most lenders would keep an adequate level of capital in a crisis. Among the region’s biggest banks, London-based Barclays Plc fared worse than Deutsche Bank AG and almost as poorly as Italy’s UniCredit SpA. Monte Paschi and Allied Irish Banks Plc fell below the minimum capital level required by regulators. 

Saudi Arabia Said to Have Offered $4 Billion to Banks - (www.bloomberg.com) Saudi Arabia’s central bank offered lenders short-term loans in late June to help ease liquidity constraints, according to five people familiar with the matter. The Saudi Arabian Monetary Agency, or SAMA, as the central bank is known, offered about 15 billion riyals ($4 billion), two of the people said, asking not to be identified as the information is private. The loans were offered at a discounted rate, two of the people said. SAMA offered individual banks as much as 1.5 billion riyals, based on their balance sheets, four people said. The loans are for up to one year. “We see this move as an immediate support to boost short-term liquidity and for banks’ ability to lend,” Monica Malik, chief economist at Abu Dhabi Commercial Bank PJSC, said by phone. “We expect to see further measures, such as possibly reducing the reserve requirement ratio or increasing the loan-to-deposit ceiling in the coming days.”

US $18bn credit card debt spree sparks fears - (www.ft.com) US banks have ramped up lending to consumers through credit cards and overdrafts at the fastest pace since 2007, triggering concerns that they are taking on too much risk in a slowing economy. The industry has piled on about $18bn of card loans and other types of revolving credit within just three months, as consumers borrow more and banks battle for customers with air miles, cashback deals and other offers. The surge in lending has come as economists expect the US election to create sufficient uncertainty to impede growth for the rest of the year, increasing the stakes for lenders at a time when the credit cycle appears to have passed a peak. Recently disclosed second-quarter results showed that credit card loans increased 10 per cent year-on-year at Wells Fargo, 12 per cent at Citigroup and 16 per cent at US Bank, according to Deutsche Bank research. Expansion was an especially aggressive 26 per cent at SunTrust, the $200bn Atlanta-based lender.

Did Germany Just Blink? - (www.wolfstreet.com) A most unusual thing happened in Europe this week. In a rare climb down, Angela Merkel’s government decided not to push the European Commission to impose a punitive fine on Portugal and Spain for their persistent failure to comply with their budget deficit targets, leading one Eurogroup minister to declare that the euro zone’s Stability Pact is “dead.” Of Europe’s 27 commissioners, only four voted in favor of applying the fines; the other 23 voted against. According to El País, the deciding factor in the decision was an impromptu phone call from German finance minister Wolfgang Schäuble to some of the more conservative commissioners, giving them the green light to forego the fine. The U-turn offers Spanish and Portuguese taxpayers a brief but welcome respite from Troika-enforced fauxterity. As we previously pointed out, if the Commission had imposed the fine, it would not have been paid by the politicians who failed to play by the rules agreed upon in Brussels; it would have been paid by the citizenry who are already suffering the consequences of the recession that helped cause the deficits.

OTHER STORIES:

Reports: US, Singapore request documents on Goldman Sachs' work on 1MDB - (www.cnbc.com)
EU Imposes Fresh Anti-Dumping Tariffs on Chinese Steel - (www.nasdaq.com)
Vanguard dividend fund shuts out new money - (www.cnbc.com)

Monte dei Paschi's last-ditch rescue plan faces high hurdles - (www.reuters.com)
Helicopter money talk takes flight as Bank of Japan runs out of runway - (www.reuters.com)

Abe’s Fiscal Plan Follows a Long Road of Packages That Failed - (www.bloomberg.com)
Europe in Crisis: The Elections to Watch for Political Risk - (www.bloomberg.com)