Asia takes heart from New Year gains in US stock futures

SYDNEY -- Asian shares crept cautiously higher on the first trading day of the new year as early gains in US stock futures spoke of some improvement in risk appetite.

MSCI's broadest index of Asia-Pacific shares outside Japan edged up 0.14 percent, as E-Mini future for the S&P 500 firmed 0.5 percent and Nasdaq futures 0.7 percent. Japan's Nikkei was closed for a holiday.

Wall Street has benefited from the merest hint of progress on the Sino-US trade standoff, though details were still notably lacking.

There was some hope of progress on the US government shutdown after President Donald Trump invited Republican and Democratic congressional leaders to a border security briefing.

However, it was not clear who would attend the meeting, which was set for later on Wednesday, or whether a deal would even be discussed.

Also looming are a closely-watched survey on US manufacturing due on Thursday, followed by the December payrolls report on Friday.

Federal Reserve Chairman Jerome Powell will have the chance to comment on the economic outlook when he participates in a joint discussion with former Fed chairs Janet Yellen and Ben Bernanke on Friday.

While the Fed is still projecting two or more rate rises this year, investors are more focused on slowing global growth and the disinflationary pulse from sliding oil prices.

Fed fund futures have all but priced out any hike for this year and now imply a quarter point cut by mid-2020.

The Treasury market also assumes the Fed is done and dusted. Yields on two-year paper have tumbled to 2.49 percent, just barely above the cash rate, from a peak of 2.977 percent in November.

Yields on 10-year notes have dived to their lowest since last February at 2.69 percent, making a bullish break of a major chart level at 2.717 percent.

The spread between two- and 10-year yields has in turn shrunk to the smallest since 2007, a flattening that has been a portent of recessions in the past.

"What is clear is that the global synchronized growth story that propelled risk assets higher has come to the end of its current run," the Treasury team at OCBC Bank wrote in a note.

"Inexorably flattening yield curves and, now, partially inverted U.S. yield curve have poured cold water on further policy normalization going ahead."

The breakneck drop in yields has been a headwind for the U.S. dollars. Against a basket of currencies it was stuck at 06.108 having fallen for two weeks straight.

The euro was firm at $1.1462 and poised for another attack on resistance in the $1.1485/1500 zone, a band that has held since late October.

Against the yen, the dollar was last trading at 109.56 and near its lowest since June last year.

The pullback in the dollar and the chance of no more US rate hikes has been a boon for gold. The precious metal fetched $1,281.41 an ounce to be close to a six-month peak.

Oil prices started with a tentative bounce after a punishing 2018. US West Texas Intermediate crude (WTI) futures slumped nearly 25 percent last year, while Brent lost 19.5 percent.

On Wednesday, US crude futures had nudged up 48 cents to $45.89 a barrel, while Brent was yet to trade.

source: news.abs-cbn.com

How to Save Money on Your Mortgage Even If You Can’t Refinance

One of the simplest ways to save money on your mortgage is by lowering your interest rate.

This is generally accomplished via a rate and term refinance, where the loan amount stays the same, but the interest rate and loan term are changed.

For example, if you’re currently stuck with a 6% interest rate on your 30-year fixed mortgage, refinancing to a rate closer to 4% will save you some dough each month.

Not only will it reduce your monthly payment, making life more affordable, but it will also result in less interest paid throughout the life of the loan.


Sounds like a win-win, but what if you’re unable to refinance for whatever reason?  Ben Bernanke, I’m looking in your direction…


 You Can Still Save Money


While you won’t be able to lower your monthly payment without refinancing, you can still save a ton of money on your mortgage another way.

Simply making extra payments, biweekly payments, rounding up payments, or implementing a variety of other methods, you can reduce the total interest you’ll pay on your mortgage without a refinance.

Sure, a refinance combined with extra monthly payments would save you even more money, but if you don’t have that option, this is the next best thing.

Imagine you took out a $100,000 mortgage five years ago and got a rate of 6% on a 30-year fixed.

You inquire about a refinance but after some shopping around determine you’re ineligible because your credit score isn’t up to snuff.

Instead of simply giving up, you can make larger payments each month and shave years off your mortgage (and pay a lot less interest).

If you paid an extra $100 monthly after making the standard payment for the first five years of the loan, you’d still save more than $26,000 and shorten the term to just over 23 years.

If you paid an extra $200 per month (after five years), you’d save more than $40,000 in interest and turn your 30-year mortgage into a 20-year loan.

The beauty of the non-refinance route is that you also don’t reset the clock on your mortgage. In other words, you don’t extend the term with a fresh loan. In fact, you do the complete opposite.


 But You Need Money…


There’s one huge caveat to this. You need money! Yes, if you actually want to save money on your mortgage without refinancing, you’ll need to make larger payments.

So for those looking to refinance to free up some cash, this method isn’t for you.

But for those who have extra cash lying around, you can get the same interest savings associated with a refinance by paying extra each month or in one lump sum.

Just keep in mind that the extra payments won’t lower future monthly payments. It’ll just reduce your term and total interest expense.

And who knows – if you pay down your mortgage more quickly now, you might be able to refinance in the future more easily because you’ll have a lower loan-to-value ratio.

source:  thetruthaboutmortgage.com

In Bernanke's final act, Fed cuts stimulus despite market turmoil

WASHINGTON - The Federal Reserve on Wednesday decided to trim its bond purchases by another $10 billion as it stuck to a plan to wind down its extraordinary economic stimulus despite recent turmoil in emerging markets.

The action was widely expected, although some investors had speculated that the U.S. central bank might put its plans on hold given the jitters overseas.

Fed Chairman Ben Bernanke, who hands the Fed's reins to Vice Chair Janet Yellen on Friday, managed to adjourn his last policy-setting meeting without any dissents from his colleagues. It was the first meeting without a dissent since June 2011 - a sign of how tumultuous Bernanke's tenure has been.

In addition to proceeding with plans to scale back its bond buying, the Fed made no changes to its other main policy plank: its pledge to keep interest rates low for some time to come.

The decision suggests that it would take a serious threat to the U.S. economy before the Fed backs down from a resolve to shelve the asset-purchase program later this year.

Indeed, it offered a somewhat rosier assessment of the U.S. economy's prospects than it did last month, saying "economic activity picked up in recent quarters." It also largely shook off surprisingly soft jobs growth in December. "Labor market indicators were mixed but on balance showed further improvement," it said.

"They really want to move to the sidelines here and get out of the (bond buying) business," said Jack Ablin, chief investment officer at BMO Private Bank in Chicago.

All 17 top Wall Street economists polled by Reuters on Wednesday expect the Fed to wind the program down by year's end, and nearly all believe the Fed won't raise rates until at least the third quarter of 2015.

Major U.S. stock indexes closed down more than 1 percent, while yields on the benchmark 10-year Treasury note hit the lowest level since late October. The dollar rose against the euro but was little changed against a broad basket of currencies.

ENDING THE PURCHASES

Importantly, the Fed stuck to its promise to keep rates near zero until well after the U.S. unemployment rate, now at 6.7 percent, falls below 6.5 percent, especially if inflation remains below a 2 percent target. Some analysts had speculated it might alter this guidance, given how close the jobless rate now is to the rate-hike threshold.

In fact, the central bank's statement largely mirrored the one it issued after its Dec. 17-18 meeting, when it announced an initial $10 billion cut to its monthly bond purchases.

At the time, Bernanke told reporters the Fed would likely continue to taper the purchases in "measured" steps through the year until it was fully wound down, as long as the economy continued to heal. He did not speak to the media on Wednesday.

In its statement on Wednesday, the Fed said it would buy $65 billion in bonds per month starting in February, down from $75 billion now. It shaved its purchases of U.S. Treasuries and mortgage bonds equally.

"The Fed's action today represents a continuation of its resolute determination to end (bond purchases) during 2014," said Daniel Alpert, managing partner at Westwood Capital in New York. "The policy has hit its 'sell by' date."

FOCUSED ON HOME

In announcing its decision, the Fed made no reference to the sell-off in emerging markets that has depressed U.S. stocks in recent days.

Markets in countries with large current account deficits, such as Turkey and Argentina, have suffered steep losses in part because of the prospect of less U.S. monetary stimulus.

These currencies and stocks slumped again after the Fed's announcement, offsetting aggressive interest rate hikes by Turkey and South Africa.

Meanwhile, economic signals in the United States - from consumer spending to industrial production and trade - have suggested the U.S. recovery closed out last year on solid ground, reinforcing expectations the Fed would continue trimming the stimulus. The weak December jobs report has been viewed as an outlier.

The central bank launched its current round of bond purchases in September 2012, its third such effort since the darkest days of the financial crisis in late 2008.

The effort to bring the purchases to a halt will now fall to Yellen, who has strongly backed the unprecedented actions the Fed has taken to boost growth and get more Americans back to work. She will chair her first policy meeting on March 18-19.

Bernanke, a professor and leading scholar of the Great Depression before joining the Fed, took the central bank far into uncharted territory during his eight years on the job, building a $4 trillion balance sheet and keeping interest rates near zero for more than five years to pull the economy from its worst downturn in decades.

source: www.abs-cbnnews.com

Big year ends with Wall Street hopeful for 2014

NEW YORK - As Wall Street's best year in more than 15 draws to a close, few are expecting a repeat performance in 2014, though traders have plenty of reasons to feel optimistic.

While the market will likely enter January quietly, with many traders still out for the holidays and few major catalysts, the upward trend is seen continuing next week, especially in some of 2013's high-flying names.

Economic growth is expected to accelerate next year, boosting employment and consumer purchasing power. But with markets repeatedly notching all-time highs, that may not translate to market gains as dramatically as in 2013.

"There's a pervasive feeling that the economy is getting better, and the Fed is still on the market's side after saying it would keep rates low," said Donald Selkin, chief market strategist at National Securities in New York.

"However, while new money will still be flowing into stocks next year, probably we'll see less money come in. There's little chance of another 30 percent gain or so next year."

The S&P 500 has risen 29 percent so far in 2013, its best annual performance since 1997. The Dow Jones industrial average is up 26 percent while the Nasdaq is nearly 38 percent higher.

The gains have been widespread, with all 10 S&P 500 sectors higher on the year. The weakest group, telecoms, rose 6.5 percent while consumer discretionary led the year with a gain of 40 percent.

One of the market's biggest boosts this year - the Federal Reserve's stimulus program - will not be as strong a factor after the central bank announced a slowing of the program in December. The Fed beginning in January will buy $75 billion in Treasuries and mortgage-backed bonds per month, down from $85 billion, and Fed Chairman Ben Bernanke, whose term expires on Jan. 31, 2014, suggested the U.S. central bank could continue to slowly reduce that stimulus throughout 2014.

The latest Reuters poll showed analysts expect the S&P 500 to rise to 1,925 points by the end of 2014, which represents a rise of 4.5 percent from current levels.

Subscription video company Netflix Inc was the S&P's strongest performer in 2013, with a jump of almost 300 percent, followed by electronics retailer Best Buy Co Inc and semiconductor maker Micron Tech, both of which climbed nearly 240 percent. Tesla Motors was another standout, soaring 346 percent, while Facebook Inc more than doubled.

These names could see more upside this week due to "window dressing," a practice in which investors buy securities with big gains to improve the appearance of their holdings before presenting the results to clients. The 2013 year will close out on Tuesday, with the market closed on Wednesday for the New Year's Day holiday.

"Consumer discretionary and tech names have driven the market over the past 12 months, so it wouldn't surprise me to see continued upside on them next week," said Jake Dollarhide, chief executive of Longbow Asset Management in Tulsa, Oklahoma.

However, Dollarhide said the names were "priced for perfection" and vulnerable to pullbacks next year.

"There won't be a sudden 'let's sell Micron and Netflix' movement, but if profit growth slows or a conference call doesn't go well, absolutely you could see a 20 to 30 percent selloff after doubling this year," he said.

The fourth-quarter earnings season will not start in earnest until the second week of January, but there will be a few clues into the economy's strength coming out next week, with data on consumer confidence and manufacturing.

Next week will also see reads on the housing market with November pending home sales on tap for Monday and the Case/Shiller report on October home prices on Tuesday. The housing sector has been in focus as U.S. benchmark Treasury yields rose to two-year highs, which could put pressure on mortgage rates, which are typically driven by the yield on the 10-year Treasury note.

"If yields stay this high, I would consider that both a technical and psychological negative for markets," said Mark Grant, managing director at Southwest Securities in Fort Lauderdale.

Pending home sales, or sales which are in contract but not yet closed, are seen rising 1 percent while the October home prices are expected to rise 0.8 percent.

In the latest week, the Dow rose 1.6 percent while the S&P was up 1.3 percent and the Nasdaq rose 1.3 percent.

source: www.abs-cbnnews.com

Fed cuts bond buying in 1st step away from historic stimulus

WASHINGTON - The Federal Reserve on Wednesday embarked on the risky task of winding down the era of easy money, saying the U.S. economy was finally strong enough for it to start scaling down its massive bond-buying stimulus.

The central bank modestly trimmed the pace of its monthly asset purchases, by $10 billion to $75 billion, and sought to temper the long-awaited move by suggesting its key interest rate would stay at rock bottom even longer than previously promised.

At his last scheduled news conference as Fed chairman, Ben Bernanke said the purchases would likely be cut at a "measured" pace through much of next year if job gains continued as expected, with the program fully shuttered by late-2014.

The move, which surprised some investors but did not cause the market shock many had feared, was a nod to better prospects for the economy and labor market. It marked a historic turning point for the largest monetary policy experiment ever.

"The recovery clearly remains far from complete," Bernanke said. But "we're hopeful ... we'll begin to see the whites of the eyes of the end of the recovery, and the beginning of the more normal period of economic growth."

Bernanke said he consulted closely on the decision with Fed Vice Chair Janet Yellen, who is set to succeed him once he steps down on January 31 after eight years at the helm. "She fully supports what we did today," he said.

Investors took the action as a validation that the outlook for the economy was improving. After a brief pullback, U.S. stocks rallied sharply, with both S&P 500 and Dow industrials closing at all-time highs.

At the same time, U.S. Treasury bond prices fell, but the move was modest, capped by the Fed's strengthened commitment to keep interest rates near zero for a long time irrespective of the reduction in its asset purchases.

The Fed said monthly purchases of both mortgage and Treasury bonds would be trimmed by $5 billion each, starting in January.

"This is a modest change, not a big one, and it shows that they are not in a rush," said Scott Clemons, chief investment strategist for Brown Brothers Harriman Wealth Management. "The Fed is using very careful language that they are going to continue to support the economy."

END OF AN ERA

The Fed's extraordinary money-printing has helped drive stocks to record highs and sparked sharp gyrations in foreign currencies, including a drop in emerging markets earlier this year as investors anticipated an end to the easing.

"They finally pulled a Band-Aid off that they've been tugging at for a long time," said Rick Meckler, president of hedge fund LibertyView Capital Management in Jersey City, New Jersey.

The Fed launched its third and latest round of quantitative easing, or QE, 15 months ago to kick-start hiring and growth in an economy recovering only slowly from the recession. Its first program was launched during the 2008 financial crisis.

The central bank's asset purchase programs, a centerpiece of its crisis-era policy, have left it holding roughly $4 trillion of bonds, and the path it must follow in dialing it down is rife with numerous risks, including the possibility of higher-than-targeted interest rates and a loss of investor confidence.

To soothe investors' nerves, the Fed said it "likely will be appropriate" to keep overnight rates near zero "well past the time" that the jobless rate falls below 6.5 percent, especially if inflation expectations remain below target.

The Fed has held rates near zero since late 2008.

It was a noteworthy tweak to an earlier pledge to keep benchmark credit costs steady at least until the jobless rate, which dropped to a five-year low of 7.0 percent in November, hits 6.5 percent.

"The actions today are intended to keep the level of accommodation the same overall," said Bernanke, who held out the prospect of fresh stimulus if the economy stumbled. He said officials could further bolster their low-rate pledge, or even cut the interest rate they pay banks on excess reserves held at the Fed in a bid to spur lending.

EXPECTATIONS ON INFLATION, RATES

In fresh quarterly forecasts, the central bank lowered its expectations for both inflation and unemployment over the next few years, acknowledging the jobless rate had fallen more quickly than expected. It now sees it reaching a range of 6.3 percent to 6.6 percent by the end of 2014, from a previous prediction of 6.4 percent to 6.8 percent.

Three policymakers expect the first rate rise to come in 2016, up from only two in September, while 12 of the Fed's 17 top officials still see the move in 2015. Futures markets do not see better-than-even odds of a rate hike until September 2015.

Critics of the bond buying, including some Fed officials, have worried the program could unleash inflation or fuel hard-to-detect asset price bubbles.

But some have credited the purchases with stabilizing an economy and banking system that had been crippled by the 2008 financial crisis and with staving off what could have been a damaging cycle of deflation.

One policymaker, Eric Rosengren of the Boston Fed, dissented against the decision, which he felt was premature given the still-high unemployment rate.

Bernanke stressed the Fed was not giving up on supporting the economy, and said it would take action if inflation failed to rise to the central bank's 2 percent target. Inflation as measured by the Fed's preferred price gauge rose just 0.7 percent in the 12 months through October.

Even so, recent growth in jobs, retail sales and housing, as well as a fresh budget deal in Congress, had convinced a growing number of economists the Fed would trim the bond purchases.

But many thought the central bank would wait until early in the new year, given persistently low inflation and the fact that the world's largest economy has stumbled several times in its crawl out of the 2007-2009 recession.

source: www.abs-cbnnews.com

Existing Home Sales Fall, Price Appreciation Slows

WASHINGTON -- Americans bought fewer existing homes in September than the previous month, held back by higher mortgage rates and rising prices.

The National Association of Realtors said Monday that sales of resold homes fell 1.9 percent last month to a seasonally adjusted annual rate of 5.29 million. That's down from a pace of 5.39 million in August, which was revised lower.

The sales pace in August equaled July's pace. Both were the highest in four years and are consistent with a healthy market.

Mortgage rates rose sharply over the summer from their historic lows, threatening to slow a housing recovery that began last year and has helped drive modest economic growth.

But many economists expect home sales will remain healthy, especially now that rates have stabilized and remain near historically low levels. Final sales in September reflected contracts signed in July and August, when rates were about a percentage point higher than in May.

The average rate on a 30-year fixed mortgage was 4.28 percent last week, down from a two-year high of 4.58 percent in August. That's also far below the 30-year average of 7 percent, according to Bankrate.com.

Sales of existing homes have risen at a healthy 10.7 percent in the past 12 months. Still, that's the slowest year-over-year increase in five months.

And the median home price has risen 11.7 percent in the past year, the Realtors said. That's also the slowest annual gain in the past five months.

Price increases may be slowing because more homes are finally coming on the market. The supply of available homes rose 1.8 percent from a year ago to 2.21 million, the first year-over-year increase in 2 ½ years.

The limited number of homes for sale is a key reason prices have risen so fast in the last year.

The economy is growing modestly and employers are adding jobs at a slow but steady pace. That's helped a growing number of Americans buy homes.

Still, many first-time buyers have been unable to enter the market. They made up just 28 percent of purchases in September, down from 32 percent a year ago. In healthier housing markets, they typically make up at least 40 percent of buyers.

First-time buyers are having trouble qualifying for loans because many banks have adopted tougher lending restrictions and higher down payment requirements since the housing bubble burst.

In their place, investors and Americans willing to pay cash are playing an outsize role in sales. Cash purchases made up 33 percent of September's sales, up from 28 percent a year ago.

Borrowing rates began to rise in May after Federal Reserve Chairman Ben Bernanke suggested that the Fed could start to slow its monthly bond purchases by the end of the year. The purchases are intended to keep interest rates low and stimulate the economy.

But the Fed decided against slowing its purchases at its September meeting, citing weak economic data and looming budget battles in Washington. The budget fights led to a partial government shutdown Oct. 1. The nation's borrowing limit was increased but only at the last minute. Economists have cut their forecasts for growth in the October-December quarter by about a half-percentage point because of the shutdown and debt limit fight.

As a result, many economists think the Fed won't slow its bond purchases until January or even later. That's likely to keep mortgage rates low well into the new year.

source: dailyfinance.com