Investors should not confuse house-price corrections in Norway, Sweden and Switzerland with property bubbles bursting. They were caused by a building surge. Speculative construction is not widespread, and demographics still outweigh risks of over-supply.
“Cities are encountering a number of obstacles that hinder their flexibility to expand apartment construction, which in turn constricts over-supply. In particular, a lack of buildable land, regulatory obstacles, steeply increasing land prices and construction costs, as well as lengthy approval times are making it difficult to react quickly on the supply side,” said Manfred Binsfeld, a director at Scope Investor Services and author of a report out today.
Over the past 10 years, real growth in residential property prices in Sweden, Austria, Switzerland, Norway and Germany have ranged from 20% to above 50%, thanks to a combination of unprecedented financing conditions, dynamic population and economic growth and relatively low construction activity.
Residential construction in many European countries has also been increasing for the first time in years and has led to price corrections in Sweden, Norway and Switzerland. In Sweden, construction of new apartments is well above the long-term average; levels are also above average in Switzerland, Norway, Denmark, Finland and Austria.
In the last five years, the greater Stockholm area has exhibited a dynamic increase in apartment construction. In both 2015 and 2016, 13,000-15,000 apartments were built against only 8,000 entering the market on average each year in the last 10 years. Zurich also saw a marked increase – 13,000 new apartments between 2012-2016 compared with 8,400 units between 2007-2011.
But residential construction still lags demographic factors in most of the major cities considered in a Scope report out today. Munich, for example, experienced a significant imbalance: between 2010 and 2017: 55,000 new apartments came onto the market while the number of new households topped 115,000. The story is similar in Stockholm and Oslo.
The current price corrections after years of real price growth are not unusual. Robust economic and demographic conditions will ensure that residential property prices in Oslo and Stockholm will continue to stabilise this year and increase moderately again from 2019. The same applies for apartments in Zurich.
“A decline in residential property prices that threatens the economy and financial system is possible in the event of a severe recession or a massive, sudden rise in interest rates. Both scenarios are unlikely,” said Binsfeld.
The full report can be found here
GameStop rally fizzles; shares still on pace for 130% weekly gain
By Aaron Saldanha and David Randall
(Reuters) – An early surge in the shares of GameStop Corp fizzled and left the video game retailer’s stock down more than 15% on Friday, throwing water on a renewed rally this week that has left analysts puzzled.
GameStop shares hovered around $94 after hitting $105 in late-morning trading. Despite Friday’s losses, the company’s stock is up about 135% for the week in the face of a broader market selloff that has sent the benchmark S&P 500 down about 2% over the same time.
Analysts have struggled to find an clear explanation for the rally, leaving some skeptical that it will continue.
“You might be able to make some quick trading money and it could be a lot of money, but in the end, it’s the greater fool theory,” said Eric Diton, president and managing director at The Wealth Alliance in New York. The theory refers to buying stocks that are over-valued in anticipation that someone else will come along to buy them at a higher price.
One catalyst that sparked GameStop’s rally in January – a high concentration of investors that had bet against the stock being forced to unwind their positions – does not appear to be as much of a factor this time.
Short interest accounted for 28.4% of the float on Thursday, compared with a peak of 142% in early January, according to S3 Partners.
Options market activity in the stock, which has returned to the top of the list in a social media-driven retail trading frenzy, suggested investors were betting on higher prices or higher volatility, or both.
Refinitiv data on options showed retail investors have been buying deep out-of-the-money call options, which are options with contract prices to buy far higher than the current stock price.
Many of those option contracts are set to expire on Friday, and would mean handsome gains for those betting on a further rise in GameStop’s stock price.
Call options, which would be profitable for holders if GameStop shares reach $200 and $800 this week, have been particularly heavily traded, the data showed.
“The actors are looking to take advantage of everything they can to maximize their impact and the timing is important,” said David Trainer, chief executive officer of investment research firm New Constructs. “The options expiration will contribute to their strategy on how to push the stock as much as they can and maximize their profits.”
Bots on major social media websites have been hyping GameStop and other “meme stocks,” although the extent to which they influenced market prices is unclear, according to analysis by Massachusetts-based cyber security company PiiQ Media.
GameStop’s stock is still far from the $483 intraday trading high it hit in January, when individual investors using Robinhood and other trading apps drove a rally, forcing many hedge funds that had bet against the video game retailer to cover short positions.
Other Reddit favorites were also lower, with cinema operator AMC Entertainment down around 5.5%, headphone maker Koss off about 25% and marijuana company Sundial Growers down less than 1% in Friday trading.
(Reporting by Aaron Saldanha in Bengaluru; Additional reporting by Devik Jain and Sruthi Shankar; Writing by David Randall; Editing by Shinjini Ganguli, Anil D’Silva and Dan Grebler)
Stocks try to recover from bond whiplash, dollar gains
By Herbert Lash
NEW YORK (Reuters) – Global equity markets swooned on Friday, even as the Nasdaq and S&P 500 tried to recover and the bond rout eased a bit, but fears of rising inflation still weighed on sentiment as data showed a strong rebound in U.S. consumer spending.
Shares of Amazon.com Inc, Microsoft Corp and Alphabet Inc edged up after bearing the brunt of this week’s downdraft, while financial and energy shares fell.
The S&P 500 gained 0.80% and the Nasdaq Composite added 1.87%. But the Dow Jones Industrial Average fell 0.3%.
U.S. consumer spending rose by the most in seven months in January as low-income households got more pandemic relief money and new COVID-19 infections dropped, setting the U.S. economy up for faster growth ahead.
The benchmark 10-year Treasury note on Thursday touched 1.614%, the highest in a year, rocking world markets. The note’s yield is up more than 50 basis points year to date and is now close to the dividend return of S&P 500 stocks.
The 10-year note fell 1.7 basis points to 1.4977%.
The amount of money swirling through markets and U.S. stocks at close to all-time highs has caused investor angst, said JJ Kinahan, chief market strategist at TD Ameritrade in Chicago.
“Many people are taking some profits and not necessarily reinvesting that money quite yet,” Kinahan said, but the tug of war isn’t over year.
“The U.S. equity market is still the best game in terms of safety versus opportunity. But there is a shift going on.”
The scale of the recent Treasury sell-off prompted Australia’s central bank to launch a surprise bond buying operation to try to staunch the bleeding.
MSCI’s benchmark for global equity markets slid 0.83% to 661.49.
In Europe, the broad FTSEurofirst 300 index closed down 1.64% at 1,559.48. Technology stocks lost the most as they continued to retreat from 20-year highs.
The dollar rose against most major currencies as U.S. government bond yields held near one-year highs and riskier currencies such as the Aussie dollar weakened.
The dollar index rose 0.578%, with the euro down 0.78% to $1.2081. The Japanese yen weakened 0.42% versus the greenback at 106.66 per dollar.
Gold fell more than 2% to an eight-month low, the stronger dollar and rising Treasury yields hammered bullion and put it on track for its worst month since November 2016.
Benchmark German government bond yields fell for the first time in three sessions but were still headed for their biggest monthly jump in three years after rising inflation expectations triggered a sell-off.
The 10-year German bund note fell less than 1 basis points to -0.263%.
European Central Bank executive board member Isabel Schnabel reiterated on Friday that changes in nominal interest rates had to be monitored closely.
Copper recoiled after touching successive multi-year peaks in six consecutive sessions, falling more than 3% as risk-off sentiment hit wider financial markets after a spike in bond yields.
Three-month copper on the London Metal Exchange (LME) slumped to $9,112 a tonne.
MSCI’s Emerging Markets equity index suffered its biggest daily drop since the markets swooned in March. MSCI’s emerging markets index fell 3.06%.
The surge in Treasury yields caused ructions in emerging markets, which feared the better returns on offer in the United States might attract funds away.
Currencies favoured for leveraged carry trades all suffered, including the Brazil real and Turkish lira, which slid for a fifth straight day, erasing all the year’s gains.
Asia earlier saw the heaviest selling, with MSCI’s broadest index of Asia-Pacific shares outside Japan sliding more than 3% to a one-month low, its steepest one-day percentage loss since the market rout in late March.
Oil fell. Brent crude futures fell $0.78 to $66.1 a barrel. U.S. crude futures slid $1.24 to $62.29 a barrel.
(Reporting by Herbert Lash, additional reporting by Tom Arnold in London, Wayne Cole and Swati Pandey in Sydney; editing by Larry King and Nick Zieminski)
European shares drop as high yields spark profit taking in tech, resources
By Shashank Nayar and Ambar Warrick
(Reuters) – European stocks closed lower on Friday, ending three weeks of gains as investors booked profits in technology and commodity-linked shares due to concerns over rising inflation and interest rates on the back of a jump in bond yields.
The benchmark European stock index fell 1.6%, and shed 2.4% for the week – its first weekly loss this month – with technology stocks losing the most as they continued to retreat from 20-year highs.
On the day, resource stocks were the softest-performing European sectors, tumbling 4.2% from a near 10-year high in their worst session in five months.
“Equity markets across the U.S. and Europe are quite expensive now and with bond yields constantly rising, the fixed income market is proving to be more attractive than the riskier equity market,” said Roland Kaloyan, a strategist at SocGen.
“Investors are actually looking at the pace at which yields drop and the current speed is quite concerning for equity markets.”
U.S. and euro zone bond yields retreated slightly on Friday, but stayed close to highs hit this week as investors positioned for higher inflation this year. Yields were also set for large monthly gains. [GVD/EUR] [US/]
Sectors such as utilities, healthcare and other staples – usually seen as proxies for government debt due to their similar yields – lagged their European peers for the month as investors sought better returns from actual debt.
Still, the benchmark STOXX 600 gained in February, helped by a rotation into energy, banking and mining stocks on expectations of a pickup in business activity following vaccine rollouts.
Travel and leisure was the strongest sector in February as investors bet on an economic reopening boom. Banks also outperformed their peers thanks to higher bond yields.
Better-than-expected fourth-quarter earnings have also reinforced optimism about a quicker corporate rebound this year. Of the 194 companies in the STOXX 600 that have reported quarterly earnings so far, 68% have beaten analysts’ estimates, according to Refinitiv.
“As recovery hopes gain ground with the economy re-opening and vaccines coming up, coupled with earnings being relatively positive, the near-to-mid-term outlook for equities seems positive with yield movements still a part of the equation,” said Keith Temperton, an equity sales trader at Forte Securities.
Among individual movers, Belgian telecom operator Proximus was the worst performer on the STOXX 600 for the day, after it flagged a lower core profit in 2021.
(Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Sriraj Kalluvila and Hugh Lawson)
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