Weak Numbers Point to Slowing US Real Estate Sector
The real estate industry in the United States has always been somewhat fickle, but figures recently released show that prospects for the future of the sector are as uncertain as ever. The increase in building permit applications seen in the previous housing report took a sharp turn for the worst with yesterday’s most recent report, illustrating a -16.30% fall in monthly permit submissions. This level has not been observed since March of this year, and the drop from July is the biggest since 2008. Impetus behind the slide is most likely attributed to the expiration of a key tax incentive, and without benefits like these the sector may shrink from the high growth witnessed in recent months. The news did not affect stocks much, with an initial drop observed in the Dow Jones Industrial Average rallying later in the day to almost break-even levels, with a net -0.19% close.
A drop in global oil inventories was reported by the American Petroleum Institute for the fourth week in a row. The drawdown of 2.3 million barrels and a higher refinery uptake saw oil prices shift upwards, but concern about future oversupply in excess of foreseen demand pushed prices down once more. An important contributing factor to these events is China’s recent economic problems. The second largest buyer of oil in the world, the devaluation of the Chinese Yuan spells trouble for oil if the country fails to position themselves again as a center for high consumption and activity. Further complications may arise as non-OPEC members increase their production of oil. Oman for example, has recently overcome the 1 million barrel per day mark for the first time. The momentum in oil prices stayed relatively steady during the news.
Like oil, copper is currently facing an output and supply vastly outstripping global demand. The price of copper is now sitting at 2009 levels, and other similar industrial metals like iron and steel are taking heavy hits as concern over the global trade environment spreads its roots. The low interest rates in years leading up to the wave of commodities growth have seen skyrocketing production proficiency for a matching demand that has now reversed. Compounding the problem is the dangerously escalating economic situation in China. If an economy of this magnitude can’t turn itself around, perhaps demand will not be able to catch up to the explosive growth witnessed in recent years. The markets fear that if this unsustainability is revealed, it will drive equity prices back to levels not seen in a decade.
FTSE 100 Downward Channel Trading Opportunity
European equities continue to retreat as the weakness begun in the Asian equity sessions spreads across the globe. Global benchmarks are pulling back as fears about the outlook creep into the picture and dent risk-sentiment. The uptick yesterday seen in UK inflation coupled with the outlook for the Bank of England vis-à-vis interest rates added to the woes of the UK FTSE 100 equity index with the benchmark continuing to give up ground since today’s reopening. The downward trending channel pattern emerging in the FTSE 100 has a bearish bias with ideal positions taken from the upper channel line targeting the lower channel line. Fighting the near-term downtrend is not suggested due to increased risk and worsening reward characteristics.