Headlines:ECB’s Rehn: We will revise lower economic projections next monthECB’s Panetta: The natural way forward would be to start raising ratesECB’s Knot: We will have a large balance sheet for some time to comeECB’s Knot: Inflation expectations are at the upper limit of being well-anchoredUS MBA mortgage applications w.e. 20 May -1.2% vs -11.0% priorGermany June GfK consumer confidence -26.0 vs -25.5 expectedGermany Q1 final GDP +0.2% vs +0.2% q/q prelimFrance May consumer confidence 86 vs 89 expectedMarkets:NZD leads, AUD lags on the dayEuropean equities slightly lower; S&P 500 futures down 0.5%US 10-year yields down 3 bps to 2.73%Gold down 0.6% to $1,855.76WTI crude up 1.2% to $111.08The session started off with a slightly better risk mood but that didn’t last as equities retreated and risk aversion starts to take hold once again now. The mood is worsening as we get into North American trading with US futures marked lower and European indices also turning earlier gains into losses now.S&P 500 futures are down 0.5%, Nasdaq futures down 0.8%, and Dow futures down 0.5%. They were up by that same amount when we did the handover from Asia to Europe.Bonds are staying bid as well as yields continue to drop, with 10-year Treasury yields down another 3 bps to 2.73%.In FX, the dollar is finding some buyers after its recent weakness with EUR/USD falling from 1.0710 to 1.0655 while GBP/USD dropped from 1.2560 to 1.2480 on the session. The greenback also advanced against the commodity currencies with USD/CAD rising from 1.2820 to 1.2875 while AUD/USD slumped from 0.7100 to 0.7050 in European trading.The New Zealand dollar remains the lead gainer but has erased its nearly 1% advance against the dollar, falling from 0.6510 to 0.6450 currently. The kiwi is buoyed by a more hawkish RBNZ rate hike earlier in the day here.Easy come, easy go. That seems to be the tale with any risk recovery as of late and today might be yet another case in point.

There are still two more inflation readings before the July meetingA 50 bps rate hike isn’t off the tableRate hike will only be on the table in July, not JuneThe remarks are more of a push to try and tiptoe towards a 50 bps rate hike come July. Yup, he’s just gone out to explicitly say that now. It’s no surprise given that Knot is one of more hawkish members. That said, this isn’t quite a view shared by the overwhelming majority for the time being though.

We have been warning for many months now of the ‚Second Great Property
Bubble‘ of this century in the USA.

 

New Home Sales, after having never fully recovered from the GFC, are
again collapsing at a frenetic pace.

 

No one wants to talk about it on Wall Street? Similarly in the broader
economic community. Yet, it is very clear in the data, and has been for some
time.

 

We are all aware of sky-rocketing home prices and the joy that brings in
wealth creation for families.

 

Though, just the family home, is merely a peg in a moving wall. In other
words, simply maintaining the ability to move sideways at the same relative
value.

It is investors who have clearly benefited. In particular, the property
fanatics of the various industry motivation groups. However rising mortgage
rates are a real problem for this often severely over-stretched group.

 

Highly leveraged investing in any asset group, stocks or property,
inevitably leads to exactly the same outcome. Higher volatility and significant
correction. Corrections are OK, but wash-out the extreme speculators
corrections can be particularly savage.

 

The collapse in New Home Sales from a point of extreme upward price
extension, artificially created by a behind the curve Fed that fed the speculation,
can to be honest only end one way. That is a property price collapse.
This is likely to be underway within a few months, if not weeks.

 

The US property market is in an extreme bubble state and it is already
beginning to burst.

 

Add a property price correction to extreme food and energy inflation and
rising interest rates, and the answer to this riddle is without equivocation, a
fully-fledged Recession.

 

The USA experience is exactly identical to the current formation of
forces in the Australian economy.

Like the USA, Australian policy makers appear completely unprepared for
what is coming.

This article was written by Clifford
Bennett, ACY Securities Chief Economist. The view expressed within this document
are solely that of Clifford Bennett’s and do not represent the views of ACY
Securities.

 

All commentary is on the record and may be quoted without further
permission required from ACY Securities or Clifford Bennett.

 

This content may have been written by a third party. ACY makes no
representation or warranty and assumes no liability as to the accuracy or
completeness of the information provided, nor any loss arising from any
investment based on a recommendation, forecast or other information supplied by
any third-party. This content is information only, and does not constitute
financial, investment or other advice on which you can rely.

Prior -11.0%Market index 315.5 vs 319.4 priorPurchase index 225.5 vs 225.0 priorRefinancing index 794.9 vs 826.9 prior30-year mortgage rate 5.46% vs 5.49% priorMortgage activity continues to slump, with the drag on refinancing contributing to the decline in the past week. Overall, this continues to suggest that there is a toll being exerted on the housing market even if prices are still yet to really cool down significantly.