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LGT Navigator: Weakening US housing market

July 19, 2022

Homebuilder sentiment in the US fell to its lowest level since May 2020 in July. The drop in confidence is related to rising mortgage rates, which are making financing sensitively more expensive and are higher than at any time since the Great Financial Crisis. At the same time, the supply bottlenecks in the construction industry that have prevailed since the corona pandemic are causing problems.

US Housing Market

The National Association of Home Builders (NAHB) housing market index in the US declined for the seventh consecutive month to hit 55 in July, the lowest level since May 2020 and compared to 67 in June and much lower than forecasts of 65. The drop was the second largest monthly decline on record, just behind the plunge around the onset of the pandemic. Homebuilder sentiment has been weakening throughout the year along with other housing market indicators as mortgage rates surge. According to NAHB chairman Jerry Konter, production bottlenecks, rising home building costs and high inflation are causing many builders to halt construction because the cost of land, construction and financing exceeds the market value of the home. The softening trend is likely to continue in the months ahead as economic momentum slows.

National bank policy weighs on gold price

Gold is holding near an 11-month low against the US dollar as traders assess the outlook for further monetary policy tightening and the impact on global growth. The gold price is currently hanging above USD 1,700 an ounce as it continues to be pressured by the strength in the US dollar. Even though the Fed might not need to tighten policy as strongly as initially expected by markets, the short-term pressure on precious metals is visible and depends on the further development of rates and therefore relative attractivity of yielding assets against unproductive gold bullions.

Energy markets remain volatile

The oil markets have seen volatile trading in recent weeks. Brent oil prices held just above USD 100 per barrel for a few days, then earlier this week posted their largest one-day increase since May, rising approximately +5%. This increase came about after Saudi Arabia refused to commit to an increase in production following a visit by US President Joe Biden. The US is doing everything it can to cap Russian crude prices in order to deprive Moscow of the means to wage war. Add to that a disruption along the Keystone pipeline that cut off delivery of some Canadian oil shipments to US refineries. On the other hand, traders expect demand to be impaired as a recession looms.



Economic Indicators July 19

MEZ Country Indicator Last period
11:00 EZ Consumer price index (June, y/y) +8.6%
14:30 USA Building permits (June, m/m) -7.0%
14:30 USA New home starts (June, m/m) -14.4%


Earnings Calender July 19

Country Company Period
USA Johnson & Johnson Q2
CH Novartis Q2


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