While you were sleeping: US housing starts slide; Obama curbs emissions

Wednesday 20th May 2009

US housing starts sank to a record low last month, led by a slide in apartments and condominiums, suggesting the property market will continue to hamper recovery in the world’s biggest economy.

Housing starts tumbled 13% to an annual rate of 458,000, according to the Commerce Department. That’s the lowest since records began in 1959. Multi-family units slumped 46% while starts for single-family homes rose 2.8%, the second monthly gain.

Home Depot, the biggest U.S. home improvement chain, fell 5.3% to US$24.63, the biggest decline on the Dow Jones Industrial Average. Lowe’s Cos., the second-largest, gained 0.6% to US$2005. The two chains posted better-than-expected first-quarter earnings this week, stoking optimism the housing market may revive soon.

The Federal Reserve widened the parameters of its US$200 billion Term-Asset Backed Securities Loan Facility, or TALF, to include older, or so-called legacy loans as it steps up efforts to unlock credit markets. Commercial mortgage-backed securities issued before Jan. 1 and with an AAA rating will be the first legacy assets eligible for TALF loans, with the pool of the facility potentially growing to US$1 trillion.

Loans secured by CMBS will have three- or five-year maturities. The Fed added DBRS and Realpoint to the list of ratings companies it would recognize for the purposes of TALF.

Stocks on Wall Street edged higher, led by energy and metals companies. The Dow Jones Industrial Average slipped 0.3% to 8474.85, while the Standard & Poor’s 500 Index fell 0.2% to 908.13. The Nasdaq Composite gained 0.1% to 1734.54.

Exxon Mobil rose 2 US cents to US$70.52 as crude oil held at a six-month high. Newmont Mining climbed 2.8% to US$43.57.

JPMorgan Chase fell 3.9% to US$35.81, Morgan Stanley rose 2.2% to US%28.91 and Goldman Sachs Group fell 1.4% to US$141.15 after reports that the three firms applied for approval from the Fed to refund a combined US$45 billion in bailout funds.

Citigroup gained 3.6% to US$3.77.

General Motors advanced 7.6% to US$1.27, leading the Dow higher, after Reuters reported that the automaker may take over some operations of bankrupt parts supplier Delphi Corp.

GM is expected to file for bankruptcy in the next two weeks, pouring its strong assets into a new company with few liabilities, according to the report, which cited a person familiar with the plan.

The US dollar fell after the housing data and as reports of the banks seeking to return government bailout funds helped ease concern about the lenders’ levels of cash and the state of the financial system, sapping demand for the greenback as a haven.

The dollar fell to $1.3649 per euro from $1.3562 yesterday and weakened to 96.10 yen from 96.30. The yen traded at 131.22 per euro from 130.61.

The Dollar Index, which measures the greenback against the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, fell 0.3% to 82.412.

The London interbank offered rate, or Libor, for three-month loans in dollars fell 3 basis points to 75 basis points today, rounding out its biggest two-day decline in more than four month.

The Banks for International Settlements reported that the global derivatives market shrank for the first time in the second half of 2008 as the financial crisis sapped trading activity.

Outstanding derivative contracts fell 13% to US$592 trillion, BIS said in a report. Credit-default swaps fell 27% to cover $41.9 trillion of debt.

US credit card customers are set to have their rights strengthened after the Senate voted 90-5 in favour of legislation that will keep a check on fees and changes to their contracts.

Lenders would be required apply payments to balances starting with those attracting the highest interest rates and would stamp out so-called universal default, where the rate on a consumer’s existing balances is increased if they’re late on payments to another lender.

President Barack Obama announced a national standard for American greenhouse-gas emissions from vehicles, and imposed stricter fuel efficiency standards, bringing in regulations that had been resisted by the Bush administration.

Obama said the new regulations will “help America break its dependence on oil, reduce harmful pollution and begin the transition to a clean-energy economy.”

Automakers will have to meet an efficiency standard of 35.5 miles per gallon by 2016, as part of changes the administration says will cut greenhouse-gas emissions by 900 million metric tons.

Automakers, which have long fought against such moves, stepped in behind Obama.

Ford Motor Co. executive chairman Bill Ford told Bloomberg that he is “actually really happy that we finally have one national standard because the worst thing that could happen to us as an industry was a patchwork of standards.”

Shares in Europe rose to a four-month high. The Dow Jones Stoxx 600 rose 1.4% to 210.78, a four-month high, after German investor confidence improved. Deutsche Bank climbed 6.4% as investors took reports of repayments of bailout funds by three US banks as a good sign for the health of the industry. BNP Paribas rose 2.6%.

Lloyds Banking Group rose 2.4% and Royal Bank of Scotland gained 4.4% after the Financial Times reported the UK government is talking to investors about selling down its holdings in partly-nationalised lenders.

BHP Billiton, the world’s No. 1 mining company, rose 3.2% and Anglo American climbed 7.5% as metal prices gained.

The FTSE 100 gained 0.8% to 4482.25. France’s CAC 40 climbed 0.9% to 3274.96 and Germany’s DAX Index gained 2.2% 4959.62.

Gold rose in New York as the U.S. dollar weakened. Gold futures for June delivery edged up 0.5% to US$926.30 an ounce on the New York Mercantile Exchange.

Copper rose as the dollar weakened and inventories fell. Stockpiles monitored by the London Metal Exchange fell 1.3% to 348,825 metric ton.

Copper for July delivery rose 0.3% to US$2.078 a pound on the New York Mercantile Exchange.

Crude oil for June delivery gained 1.3% to US$59.81 a barrel in New York.

Businesswire.co.nz

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