U.S. House Prices Rise 5.7 Percent over the Last Year; Up 0.9 Percent from the First Quarter of 2024

Data Interpretation

Economic

Summary:

U.S. house prices rose 5.7 percent between the second quarter of 2023 and the second quarter of 2024, according to the FHFA House Price Index .

U.S. house prices rose 5.7 percent between the second quarter of 2023 and the second quarter of 2024, according to the Federal Housing Finance Agency (FHFA) House Price Index (FHFA HPI®). House prices were up 0.9 percent compared to the first quarter of 2024. FHFA’s seasonally adjusted monthly index for June was down 0.1 percent from May.

“U.S. house prices saw the third consecutive slowdown in quarterly growth,” said Dr. Anju Vajja, Deputy Director for FHFA’s Division of Research and Statistics. “The slower pace of appreciation as of June end was likely due to higher inventory of homes for sale and elevated mortgage rates.”

Significant Findings

Nationally, the U.S. housing market has experienced positive annual appreciation each quarter since the start of 2012.

House prices rose in 50 states and the District of Columbia between the second quarter of 2023 and the second quarter of 2024. The five states with the highest annual appreciation were 1) Vermont, 13.4 percent; 2) West Virginia, 12.3 percent; 3) Rhode Island, 10.1 percent; 4) Delaware, 10.0 percent; and 5) New Jersey, 9.9 percent.

House prices rose in 96 of the top 100 largest metropolitan areas over the last four quarters. The annual price increase was the greatest in Syracuse, NY at 14.2 percent. The metropolitan area that experienced the most significant price decline was Austin-Round Rock-Georgetown, TX at -3.2 percent.

All nine census divisions had positive house price changes year-over-year. The Middle Atlantic division recorded the strongest appreciation, posting a 8.5 percent increase from the second quarter of 2023 to the second quarter of 2024. The West South Central division recorded the smallest four-quarter appreciation, at 2.8 percent.

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Westpac

Central Bank

Economic

Key results (August 2024)

•Business confidence: 50.6 (Prev: 27.1)

•Expectations for own trading activity: 37.1 (Prev: 16.3)

•Activity vs same month one year ago: -23.1 (Prev: -24.3)

•Inflation expectations: 2.92% (Prev: 3.20%)

•Pricing intentions: 41.0 (Prev: 37.6)

Business confidence has lifted sharply in the wake of the Reserve Bank’s turnaround on monetary policy. The ANZ survey of business opinion saw general confidence rise from 27.1 to 50.6 in August, the highest reading in a decade. Firms’ expectations for their own activity, which tends to correspond more closely with GDP growth, rose from 16.3 to 37.1, the highest since 2017.

Firms’ confidence was up across a range of measures, including hiring and investment intentions and expected profits. And to remove any doubt about the source of this newfound optimism, expectations about the availability of credit rose to their second-highest since this question was added to the survey in 2009.

Many of the survey responses will have been received before the RBNZ cut the OCR at its 14 August Monetary Policy Statement. However, the change of tone in its July policy review laid the groundwork for this move.

We wouldn’t suggest that a single OCR cut could make this degree of difference to the economic outlook. Rather, we think this shows how downbeat firms had become earlier in the year. We had noticed a distinct souring in the mood amongst businesses at the prospect that interest rate cuts might be another year or so away, as the RBNZ had been signalling in its February and May forecasts. With the economy having already been effectively flat for the last year and a half, the prospect of having to “survive until ‘25” would have been daunting for many.

While the outlook may be looking brighter, businesses are still doing it tough right now. A net 23% said that their output was down on a year ago, only slightly better than the net 24% in July. A net 15% said that their staff levels were down on a year ago, compared to a net 20% last month.

The improvement in confidence also came with a note of caution on the inflation front. Firm’s expectations of general inflation fell further from 3.2% to 2.9%, the lowest reading since July 2021. However, their own pricing intentions ticked up slightly for a second month, and their expectations for wages and other costs held steady.

The RBNZ emphasised the recent weakness of high-frequency activity indicators in its decision to cut the OCR in August. And indeed there was a marked deterioration across a range of measures for the June month. However, the updates for July and beyond have generally improved since then. We don’t think this will derail further OCR cuts in the months ahead, but the lift in business confidence along with other measures should see the market scale back the odds of larger 50bp moves. NZ First Impressions: ANZ Business Confidence, August 2024_1

NZ First Impressions: ANZ Business Confidence, August 2024_1

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Thomas

Economic

Central Bank

TOKYO (Aug 29): The Japanese government has upgraded its economic assessment for the first time in more than a year on signs of improved consumption, fostering optimism for a broader recovery.

"The Japanese economy is recovering at a moderate pace, although it appears to be still pausing in parts," the Cabinet Office said in its monthly economic report for August, raising the assessment for the first time since May 2023.

Consumption is picking up as the impact of shipping stoppage at some automakers is easing, the government said. The increase in household disposable income, coupled with temporary cuts in income and resident taxes, also helped consumption.

However, the extreme heat this summer yielded mixed consumption results, the report said. While demand for air-conditioning, parasols and ice creamed increased, customer traffic at theme parks and restaurants declined.

The report also anticipated a fall in import prices, primarily due to the recent correction in the yen's weak trend.

The government also upgraded its assessment on housing construction to "almost flat" from "in a weak tone" for the first time in more than two years, attributing the change to a halt in the decline of owner-occupied house construction.

Assessments for the remaining sub-sectors, including exports, remained unchanged.

The report was presented at a meeting attended by relevant cabinet ministers and Bank of Japan (BOJ) governor Kazuo Ueda.

Earlier this month, government data showed Japan's economy expanded by a much faster-than-expected 3.1% annualised rate in the second quarter. The rebound, after a slump at the start of the year, was largely attributed to a robust increase in consumption.

Source: Theedgemarkets

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Samantha Luan

Forex

Economic

Key Points

---EUR/USD dives below 1.1100 as lower inflation in Spain and in six key German states prompts expectations of another ECB rate cut.

---Eurozone and German inflation are estimated to have slowed further in August.

---The US core PCE inflation data could influence market expectations for Fed rate-cut size in September.

EUR/USD faces a sharp sell-off, sliding below the round-level support of 1.100 in Thursday’s European session. The major currency pair extends its correction after some preliminary inflation data from Spain and six important German states showed that price pressures continued to abate in August, increasing bets of an upcoming interest-rate cut by the European Central Bank (ECB). Meanwhile, the US Dollar increased further above Wednesday’s high, with the US Dollar Index (DXY) – which tracks the Greenback’s value against six major currencies – rising to near 101.30.

The sharp recovery in the US Dollar suggests that investors are turning risk-averse with United States (US) Personal Consumption Expenditure Price Index (PCE) data for July on the horizon. The underlying inflation data is expected to influence market speculation for the likely size of Federal Reserve (Fed) interest-rate cuts in September.

The PCE inflation report is expected to show that the annual core inflation rose by 2.7% in July, faster than the 2.6% seen in June. Month-over-month, core PCE is estimated to have grown steadily by 0.2%.

In Thursday’s session, investors will keenly focus on the revised estimates of Q2 Gross Domestic Product (GDP) and the Initial Jobless Claims data for the week ending August 23 at 12:30 GMT. Q2 GDP revised estimated are unlikely to impact the US Dollar unless there comes a substantial change. In Europe, the preliminary August inflation data for overall Germany will be published at 12:00 GMT.

Investors will also focus on the Jobless Claims data as the Fed is now vigilant to downside risks to the labor market.. Fed Chair Jerome Powell vowed to support deteriorating labor market strength in his speech at the Jackson Hole (JH) Symposium.

Daily digest market movers: EUR/USD weakens on Euro’s broader underperformance

EUR/USD extends its downside below the crucial support of 1.1100 in European trading hours. The shared currency pair weakens on the Euro’s (EUR) underperformance against its major peers as traders seem to be certain that the European Central Bank (ECB) will cut interest rates in September.

A sharp slowdown in price pressures in Spain and six important German states has boosted ECB September rate cut bets. The Annual Harmonized Index of Consumer Prices (HICP) in Spain came in at 2.4%, the slowest in year-to-date (YTD).

Firm speculation for ECB September rate cuts was already prompted by consistently easing Eurozone price pressures and its poor economic outlook, as suggested by the flash HCOB PMI report for August. However, the Eurozone Economic Sentiment Indicator, Industry Confidence, and Services Sentiment have come in better than expected in August. On the contrary, Consumer Confidence deteriorated to -13.5 from the estimates and the former release of -13.4.

The ECB is also expected to deliver an additional rate cut somewhere in the last quarter of the year. A few ECB policymakers appear to be comfortable with the central bank reducing its key borrowing rates further this year.

Dutch policymaker Klaas Knot said to a conference panel on Tuesday that "as long as our disinflation path still converges to a return to 2% inflation at or before the end of 2025, then I'm comfortable with gradually taking our foot off the brake." When asked about September rate cut expectations, Knot said: "I will have to wait until I have the full data and information set going into that meeting to decide my position on whether September is appropriate,” adding that "I would have to do so again in October, December and whenever," reported Reuters.

The German and Eurozone flash HICP data for August will be published at 12:00 GMT later today and on Friday, respectively. German annual HICP is estimated to have grown at a slower pace of 2.3% from 2.6% in July. Month-over-month, the HICP is forecasted to have remained flat after rising 0.5% in July.

Source: FXSTREET

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Alex

Forex

The EUR/USD pair is holding steady at around 1.1134 as markets consolidate USD positions during a lull in significant news. Investors are now keenly awaiting the release of the Core PCE inflation data, a critical metric that the Federal Reserve uses to gauge inflationary pressures and shape its interest rate policy.

The anticipation surrounding this week’s Core PCE release is particularly high due to the lack of impactful data from both the US and the eurozone earlier in the week. While significant shifts in expectations regarding the Fed’s monetary policy trajectory are unlikely, the upcoming report will still be crucial for fine-tuning investor forecasts.

The market has currently primarily priced in a rate cut by the Fed at its September meeting, with the baseline expectation being a 25 basis point reduction. However, a 34.5% probability of a more aggressive cut of 50 basis points remains. This possibility is bolstered by recent comments from Fed Chair Jerome Powell indicating that the timing for a rate adjustment is appropriate now, echoing sentiments within the monetary policy community.

EUR/USD technical analysis

On the H4 chart of EUR/USD, the pair is forming a structure indicating an initial decline towards 1.1090. Following this decline, a corrective movement to 1.1150 is anticipated. Once this correction concludes, a further decline to 1.1030 is expected, potentially continuing to 1.0960. This bearish outlook is supported by the MACD indicator, with its signal line positioned above zero but trending sharply downwards.

On the H1 chart, EUR/USD has already declined to 1.1104. A corrective phase towards 1.1150 may follow, testing it from below before resuming the downward trajectory towards 1.1090. The Stochastic oscillator, currently above 80, suggests an impending drop to 20, reinforcing the likelihood of continued downward movement.

Source: ACTIONFOREX

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FXCM

Stocks

NAS100 Analysis

Nvidia once again blew past estimates with record top and bottom lines, driven by strong demand for its AI infrastructure, Furthermore, executives see new record sales in the current quarter, along with "several billion dollars" in Blackwell shipments – its next-gen AI platform - later in the year.

But the results come at a period of AI skepticism and markets are in a show-me mode, as other AI darling have not been able to demonstrate return of investment. Nvidia's guidance plays into these fears, since the projected nearly 80% revenue growth may sound impressive, but would actually mark further slowdown and a departure from recent triple-digit expansions. The gross margin guidance also underwhelmed and the slower Blackwell rollout is another source of concern. Markets reacted negatively, as the stock dropped almost 7% after-hours.

NAS100 has rallied over the last two years on the back of Nvdia's surge and faced pressure after the results of the AI bellwether. However it regains its poise, due to the euphoria around the Fed. Chair Powell opened the door to a September pivot with his Jackson Hole speech and market expect at least for cuts this year. However, Mr Powell did not provide insight around the size and pace and the optimism may be misplaced. The first test is due on Friday with the PCE inflation update. Further progress on disinflation will be helpful, but any upside surprises could douse optimism.

The rebound from the post-NFPs growth scare fades and the along with AI skepticism that Nvidia did not dispel, could send NAS100 back into correction territory (at around 18,700), but further losses towards and beyond the 200Days EMA (blue line) would need a negative PCE surprise and shift in Fed expectations.nas

And NAS100 remains above the 38.2% Fibonacci of the recent rebound. This creates scope for higher highs (19,951), but we are cautious at this stage for further strength that would challenge the record peak (20,788). Weather Underwhelming Nvidia Outlook Ahead of PCE Update_1

Weather Underwhelming Nvidia Outlook Ahead of PCE Update_1

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Warren Takunda

Economic

Bond

Government bond markets, which have enjoyed a summer of solid price gains, now face a reckoning with their bets for speedy central bank rate cuts and slowing inflation, not to mention a tight U.S. presidential election.

Benchmark 10-year U.S. Treasury yields are set to end August down nearly 30 bps, their biggest monthly drop this year, driven by expectations for speedier rate cuts - even as economic data has eased the recessionary fears sparked by the last U.S. jobs report.

With borrowing costs in Germany and Britain posting big drops in July, all three regions were already set for their first quarterly drops since the end of 2023. Bond yields move inversely with prices.

For some, these moves confirm one of the current big investment themes -- the notion that "bonds are back" after taking a beating amid the post-pandemic surge in inflation and interest rates.

Government bonds returned just 4% globally last year after 15% losses across 2021-22, and have returned 1.3% year-to-date.

Yet big investors reckon that gains will at best lose steam, or, at worst, prove to be overdone.

"We have many indicators showing that the economy is not falling into a recession. We are just in a soft landing," said Guillaume Rigeade, co-head of fixed income at Carmignac.

"It's not justified to us, this acceleration to a cutting cycle so quick," said Rigeade, who is bearish on longer-dated bonds on both sides of the Atlantic.

The Dow shed four-tenths of a percent, the S&P 500 lost six-tenths, and the Nasdaq dropped more than one percent.

Bonds have been boosted by bets that the Federal Reserve will cut rates around 100 basis points across its three remaining meetings this year -- meaning one 50 bps move -- double the level expected in late July. Traders have also ramped up bets on peers like the European Central Bank.

The message appears at odds with equity markets, however, whose roundtrip has left returns flat since mid-July, while global government bonds have returned around 2%.

Economists polled by Reuters also expect roughly one move fewer than traders anticipate from the ECB and the Fed this year.

The discrepancies highlight the challenge of navigating the government bond market for the rest of 2024 for investors keen to earn meaningful returns.

Bond Markets Face a Reckoning After Stellar Summer Run_1

TESTING TIMES

The first test takes shape in the form of next week's August U.S. jobs report.

If that shows a second month of significant weakness, it may increase bets on a 50 bps Fed move in September, while a stronger print may price out cuts, analysts said.

"We're in the slowing point of the economic cycle... It's where you get the most volatility in terms of data like payrolls," said Guy Stear, head of developed markets strategy at Amundi Investment Institute, the research arm of Europe's largest asset manager.

He recommends assessing how much of their summer falls bond yields maintain in early September before adjusting positioning.

Bond markets have also been supported by easing inflation. Market gauges of inflation expectations recently fell to their lowest level in more than three years in the U.S. and their lowest in nearly two years in the euro zone. ,

While headline figures are nearing central bank targets, core inflation remains stickier on both sides of the Atlantic, warranting caution.

"The market is too optimistic in the way it is pricing a perfect normalisation," Carmignac's Rigeade said, adding that risks were skewed towards inflation coming in higher than expected in the coming quarters.

While contained, the surge in oil prices driven by tensions in Libya and the Middle East in recent sessions is a sign of uncertainty ahead.

Bond Markets Face a Reckoning After Stellar Summer Run_2

NOVEMBER PUZZLE

No doubt, the elephant in the room remains November's U.S. presidential election.

The race between Vice President Kamala Harris and Republican rival Donald Trump is tight, and 61% of investors in BofA's August survey were still not trading the election in U.S. Treasuries.

"Whatever the outcome will be, it will result in still high fiscal spending and large bond supply of U.S. Treasuries," said Capital Group investment director Flavio Carpenzano.

A Trump presidency backed by a Republican Congress would pressure longer-dated bonds in particular, implying both higher spending and inflation that risks remaining above the Fed's 2% target, Carpenzano added.

A focus on fiscal discipline, along with more clarity on U.S. growth, may support euro zone bonds, which outperformed last year but have underperformed U.S. peers this year.

The U.S. economy grew faster than expected in the second quarter and economists polled by Reuters have upgraded their expectations for growth over the year as a whole to 2.5%.

They still forecast 0.7% growth this year in the euro zone, which saw economic growth of just 0.3% last quarter while Germany unexpectedly contracted.

"If there's one economy which needs proper (interest rate cuts), it's the euro zone, because that's where the fundamentals are weaker and deteriorating," said Salman Ahmed, Fidelity International's global head of macro and strategic asset allocation.