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Note: This post is abbreviated this morning because of unexpected travel. The same may be true (if published at all) tomorrow morning, Friday, 14 April.
Japanese shares drop as Trump comments tank dollar, push up yen (CNBC) Markets in Asia traded mixed on Thursday, with Japanese shares dropping amid a stronger yen against the dollar. The dollar index, which measures the dollar against a basket of currencies, lower from levels near 100.80 to about 100.06 on Thursday at 11:13 a.m. HK/SIN. Brent fell 0.18% to $55.76 a barrel, while U.S. crude was down 0.19% at $53.01. Spot gold had slipped 0.1% to $1,285.26 per ounce by 0327 GMT, after hitting its strongest since Nov. 10 at 1,287.98. U.S. gold futures climbed 0.7% to $1,287.50.
DeVos Undoes Obama Student Loan Protections (Bloomberg) Trump’s education secretary wants to limit costs at a time when more than 1 million Americans are annually defaulting. Obama issued a pair (PDF) of memorandums (PDF) last year requiring that the government’s Federal Student Aid office, which services $1.1 trillion in government-owned student loans, do more to help borrowers manage, or even discharge, their debt. But in a memorandum (PDF) to the department’s student aid office, DeVos formally withdrew the Obama memos.
They’re either a valuable financial tool for homeowners or a harbinger of trouble on the horizon: Cash-out refinancings, which were wildly popular during the housing boom years and which contributed to the severity of the crash, are on the rise again.
National mortgage investor Freddie Mac reports that 45 percent of all home-loan refinancings in the final three months of last year involved cash-outs. That was the highest percentage since the end of 2008. Black Knight Financial Services, a mortgage technology and analytics firm, says homeowners pulled $31 billion from their equity holdings in the fourth quarter of 2016 - a jump of 50 percent over the same period the year before.
But when cash-out refis begin to soar, is that a positive or negative indicator for the housing market’s health? Critics such as Connecticut-based real estate analyst Keith Jurow say the trend today is reminiscent of the tail end of the boom years - and a little worrisome. Although banks and other lenders may have more-rigorous underwriting standards than they did during the 2003-2008 period, he says, they may be “overconfident" about how long housing-price inflation will continue and how much of an equity cushion borrowers should be required to maintain. If too many owners get overleveraged, as millions did during the housing boom, any significant market downturn could spell trouble.
“I consider this to be 2007" - near the end of a multiyear string of housing price increases, Jurow told me in an interview. “The euphoria is similar" - people assume that prices can only keep going up. Yet in the event of a financial market correction, which Jurow sees as a distinct possibility, home-price inflation could cease and the 15 percent or 20 percent equity levels that some banks set as the minimum required for cash-outs “could disappear quickly," as they did in 2008 and 2009.
Jurow concedes the situation is not as ominous as it was at the height of the boom, when more than 80 percent of all refinancings were cash-outs, but he sees hints of trouble brewing in a handful of micro markets such as luxury condominiums in New York, Miami and San Francisco, where prices are softening or declining.
Other experts disagree. Leonard Kiefer, deputy chief economist at Freddie Mac, notes that today’s level of cash extractions is nowhere near what it was for much of the past decade. And, unlike the permissive lending practices during the boom years, today’s cash-out borrowers tend to have solid credit, and their post-refinancing loan-to-value ratios are much lower. Freddie Mac won’t purchase cash-out mortgages with less than 20 percent equity stakes. In its low-down-payment loan programs, cash-out refis are banned.
U.S.-Russia relations at another low after Syria attacks (Reuters) The presidents of the United States and Russia on Wednesday both presented souring views of the relationship between their two countries, exchanging sharp words as Moscow extended an icy welcome to the United States' top diplomat in a face-off over Syria. In Washington, President Donald Trump said the United States' relationship with Moscow "may be at an all-time low". Trump's comments came after he made his biggest foreign policy decision of his new presidency last week, firing missiles at Syria to punish Moscow's ally for its suspected use of poison gas. Russia condemned the U.S. action. Hours earlier on Wednesday, Russian President Vladimir Putin was equally pessimistic, saying in an interview broadcast on Russian television:
"The level of trust on a working level, especially on the military level, has not improved but has rather deteriorated."
North Korea's hidden submarine threat is another worry as regime warns it's 'ready' for war (CNBC) A nuclear attack threat from a North Korean submarine is one of the nightmare scenarios facing Japan and South Korea. The chilling thought of North Korea's fully submersible submarines firing a nuclear ballistic missile isn't as far-fetched as some might think. Pyongyang has made major advances in weapons in recent years and shown a willingness to use its submarines for offensive military actions. Indeed, last month was the seventh anniversary of the sinking of South Korea's Cheonan navy ship by a North Korean submarine torpedo attack. That aggression killed 46 sailors and wasn't the first time the reclusive North had made incursions into South Korean waters. The submarine threat adds to growing fears in the region as North Korean leader Kim Jong Un's nuclear weapons ambitions show no signs of slowing. It also comes as a U.S. carrier strike force led by the USS Carl Vinson sailed toward the Korean Peninsula.
Tensions grow on Korean peninsula ahead of 'big and important event' (Reuters) South Korea said on Thursday it believed it would be consulted by the United States before any possible pre-emptive U.S. strike against Pyongyang, where foreign journalists gathered for "a big and important event". With a U.S. aircraft carrier group steaming to the area, tensions on the Korean peninsula grew this week amid concern that the reclusive North could soon conduct its sixth nuclear test or more missile launches in defiance of United Nations sanctions.
China March trade balance surplus hits $23.9 billion, higher than expected $10 billion (CNBC) China's exports rose 16.4% in March from a year ago, beating a Reuters' analyst forecast of 3.2% to reverse a decline of 1.3% in February, data from the Chinese customs showed Thursday. The country's imports rose 20.3% on-year, down from a surge of 38.1% a month ago, but still above the rise of 18.0% analysts predicted. China's trade surplus in U.S. dollar terms was $23.93 billion in March, more than double the $10 billion analysts had forecast. The world's second largest economy posted a rare $9.15 billion trade deficit in February. Exports in the first quarter of the year rose 8.2% from the same period last year, while imports surged 24.0%. China's first-quarter trade surplus was $65.61 billion.
Trump Says China Signals Assistance in Restraining North Korea (Bloomberg) President Donald Trump said he’s leaning on China’s President Xi Jinping to put enough pressure on North Korea for the regime to back off its nuclear weapons and missile development, which has raised tension throughout Asia. Trump said during a White House press conference Wednesday with NATO Secretary General Jens Stoltenberg:
“President Xi wants to do the right thing. I think he wants to help us with North Korea."
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