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U.S. Housing Starts Tumble in August

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Housing Starts

U.S. Housing Starts Tumble in August

U.S. housing starts fell more than expected in August likely as bad weather disrupted building activity in the South, but a solid increase in permits for single-family dwellings suggested demand for housing remained intact.

Tuesday’s weak housing report came as officials from the Federal Reserve were due to gather for a two-day meeting to assess the economy and deliberate on monetary policy.

It joined a stream of recent soft economic data such as retail sales, nonfarm payrolls and industrial production, which, together with low inflation are expected to encourage the U.S. central bank to leave interest rates unchanged on Wednesday.

Groundbreaking decreased 5.8 percent to a seasonally adjusted annual pace of 1.14 million units after two straight months of strong gains, the Commerce Department said.

Single-family housing starts in the South, which accounts for the bulk of home building, tumbled 13.1 percent to their lowest level since May 2015. Economists said flooding in Texas and Louisiana was probably behind the drop in starts last month.

“We believe that the slowdown in August starts likely owes to a temporary weather effect rather than a substantive shift in the underlying trend,” said Rob Martin, an economist at Barclays in New York. “Excluding the South, housing starts increased a robust 4.2 percent.”

Permits for future construction slipped 0.4 percent to a 1.14 million-unit rate last month as approvals for the volatile multi-family homes segment tumbled 7.2 percent to a 402,000 unit-rate. Permits for single-family homes, the largest segment of the market, surged 3.7 percent to a 737,000-unit pace.

Economists polled by Reuters had forecast housing starts falling to a 1.19 million-unit pace last month and building permits rising to a 1.17 million-unit rate.

U.S. financial markets were little moved by the data as investors awaited Wednesday’s outcome of the Fed’s meeting. The broader PHLX housing index .HGX, which includes builders, building products and mortgage companies, fell 0.76 percent.

STRONG HOUSING FUNDAMENTALS

Last month’s decline in starts was largely anticipated as groundbreaking activity has been running well ahead of permits approvals over the past several months, especially in the single-family housing segment.

The drop left starts just below their second-quarter average, suggesting little or no contribution from residential construction to economic growth in the third quarter.

Spending on home building was a small drag on output in the April-June period. Following the report, the Atlanta Fed trimmed its third-quarter gross domestic product estimate by one-tenth of a percentage point to a 2.9 percent annual rate. The economy grew at a 1.1 percent rate in the second quarter.

Demand for housing is being driven by a tightening labor market, which is lifting wages. A survey of homebuilders published on Monday showed confidence hitting an 11-month high in September, with builders bullish about current sales now and over the next six months, as well as prospective buyer traffic.

Housing market strength boosted Lennar Corp’s (LEN.N) profits in the third quarter. Lennar, the second-largest U.S. homebuilder, said it sold 6,779 homes in the three months ended Aug. 31, up 7.3 percent from a year earlier, while its average sales price rose more than 3 percent.

“Conditions seem well aligned for strong new home building. Borrowing costs remain low, the inventory of homes for sale, both new and existing, are relatively low and failing to make meaningful progress,” said Kristin Reynolds, a U.S. economist at IHS Global Insight in Lexington, Massachusetts.

Groundbreaking on single-family homes dropped 6.0 percent to a 722,000-unit pace in August, the lowest level since last October. But with permits for the construction of single-family homes rising last month, single-family home building could rebound in the months ahead.

The single-family housing market is being supported by a dearth of previously owned homes available for sale.

Housing starts for the volatile multi-family segment fell 5.4 percent to a 420,000-unit pace. The multi-family segment of the market has been buoyed by strong demand for rental accommodation as some Americans shun homeownership in the aftermath of the housing market collapse.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Continue to Slide: Drops Over 1% Amid Surging U.S. Stockpiles

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Crude Oil

Amidst growing concerns over surging U.S. stockpiles and indications of static output policies from major oil-producing nations, oil prices declined for a second consecutive day by 1% on Wednesday.

Brent crude oil, against which the Nigerian oil price is measured, shed 97 cents or 1.12% to $85.28 per barrel.

Similarly, U.S. West Texas Intermediate (WTI) crude slumped by 93 cents or a 1.14% fall to close at $80.69.

The recent downtrend in oil prices comes after they reached their highest level since October last week.

However, ongoing concerns regarding burgeoning U.S. crude inventories and uncertainties surrounding potential inaction by the OPEC+ group in their forthcoming technical meeting have exacerbated the downward momentum.

Market analysts attribute the decline to expectations of minimal adjustments to oil output policies by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known collectively as OPEC+, until a full ministerial meeting scheduled for June.

In addition to concerns about excess supply, the market’s attention is also focused on the impending release of official government data on U.S. crude inventories, scheduled for Wednesday at 10:30 a.m. EDT (1430 GMT).

Analysts are keenly observing OPEC members for any signals of deviation from their production quotas, suggesting further volatility may lie ahead in the oil market.

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Energy

Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Crude Oil - Investors King

Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Commodities

Palm Oil Rebounds on Upbeat Malaysian Exports Amid Indonesian Supply Concerns

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Palm Oil - Investors King

Palm oil prices rebounded from a two-day decline on reports that Malaysian exports will be robust this month despite concerns over potential supply disruptions from Indonesia, the world’s largest palm oil exporter.

The market saw a significant surge as Malaysian export figures for the current month painted a promising picture.

Senior trader David Ng from IcebergX Sdn. in Kuala Lumpur attributed the morning’s gains to Malaysia’s strong export performance, with shipments climbing by a notable 14% during March 1-25 compared to the previous month.

Increased demand from key regions like Africa, India, and the Middle East contributed to this impressive growth, as reported by Intertek Testing Services.

However, amidst this positivity, investors are closely monitoring developments in Indonesia. The Indonesian government’s contemplation of revising its domestic market obligation policy, potentially linking it to production rather than exports, has stirred market concerns.

Edy Priyono, a deputy at the presidential staff office in Jakarta, indicated that this proposed shift aims to mitigate vulnerability to fluctuations in export demand.

Yet, it could potentially constrain supply availability from Indonesia in the future to stabilize domestic prices.

This uncertainty surrounding Indonesian policies has added a layer of complexity to palm oil market dynamics, prompting investors to react cautiously despite Malaysia’s promising export performance.

The prospect of Indonesian supply disruptions underscores the delicacy of global palm oil supply chains and their susceptibility to geopolitical and regulatory factors.

As the market navigates these developments, stakeholders remain attentive to both export data from Malaysia and policy shifts in Indonesia, recognizing their significant impact on palm oil prices and market stability.

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