Chart of the Day
US house price inflation fell to 18.8% in November. Over the past three months, annualized house price growth has been 14.1%, which suggests the annual rate will slow further. That is partially due to the rise in mortgage rates in recent months, which have increased alongside bond yields. The question is, is this the start of an even more pronounced slowdown? With the Fed about to start tightening policy, some would argue it is. Yet with home inventories very limited at the moment, house price inflation could remain strong even as interest rates move higher.
Macro
US house prices have after all risen by much less than those in countries advanced economies in recent years.
The German Ifo survey expectations component finally rose in January, but not be enough to start pointing to positive GDP growth.
Despite Omicron, consumers’ assessment of the present situation improved in January. Their expectations deteriorated though.
Markets
Another volatile day for equities saw the US indices drop again, with the Nasdaq hit hardest.
The growth to value ratio is still much higher than before Covid, raising the risk of more pain ahead for growth stocks.
Despite the weakness in equities, WTI rose sharply yesterday, to $85.6. That could be a sign it will rise even further if equities soon recover.
The safe-haven Japanese yen is acting more as we might expect, rising against the USD in recent weeks, though the Swiss franc has not moved as much.
The Baltic Dry Index has fallen by 18.3% in the past week and is now back at the pre-covid norm, but container rates continue to rise.
Lumber has also been dropping back sharply, will the fall be as rapid as last year?
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