by Calculated Risk on 11/10/2011 08:36:00 PM

New temporary PMs for Italy and Greece, a new European economic forecast (that is too optimistic, I think Europe is already in a new recession), and S&P goofs ...

From the NY Times: A Shaken Italy Is Poised to Name a New Government

Italy pulled back from the brink on Thursday, as lawmakers seemed poised to usher out Prime Minister Silvio Berlusconi and replace his government with a cabinet of technocrats most likely led by a former European Commissioner, Mario Monti.
...
Mr. Berlusconi was hoping to buy himself more time in power. But now, with the Senate expected to approve the measures on Friday and the Lower House on Saturday, Mr. Berlusconi is expected to step down by Monday.

Asked what had sped up the process, Stefano Micossi, an economist and the director of Assonime, an Italian business research group, put it simply: “The view of the precipice.”

From the Athens News: Papademos confirmed as new PM

... the former ECB vice-president [Lucas Papademos] was confirmed as the country’s next prime minister.

The formalities of the resignation of outgoing ministers and swearing-in of the new government are expected to be completed on Friday, with a view to the holding of vote of confidence in parliament possibly as early Monday.

"The Greek economy is facing huge problems despite the efforts undertaken," Papademos said in his first public remarks. "The choices we will make will be decisive for the Greek people. The path will not be easy but I am convinced the problems will be resolved faster and at a smaller cost if there is unity, understanding and prudence."

From the NY Times: Europe’s Growth Forecast Is Lowered

Europe’s economic outlook received a fresh dose of gloom Thursday, when the European Commission warned that the Continent’s economies were stalled and faced the risk of a double-dip recession.
...
“The recovery in the European Union has now come to a standstill, and there is a risk of a new recession,” Olli Rehn, the European commissioner for economic and monetary affairs, told reporters in Brussels.

“This forecast is in fact the last wake-up call,” he added.
...
Even Germany, the economic engine of Europe, is now expected to record just 0.8 percent growth in 2012 — more than a percentage point lower than the European Commission predicted in its spring forecast. And none of the euro zone’s other three biggest economies — France, Italy and Spain — are projected to achieve 1 percent growth in 2012.

I think Europe is already in recession.

And from Bloomberg: S&P’s Faux Pas on French Rating Roils Markets

Standard & Poor’s roiled global equity, bond, currency and commodity markets when it sent and then corrected an erroneous message to subscribers suggesting France’s top credit rating had been downgraded.

by Calculated Risk on 11/10/2011 05:16:00 PM

From the FDIC: Century Bank of Georgia, Cartersville, Georgia, Assumes All of the Deposits of Community Bank of Rockmart, Rockmart, Georgia

As of September 30, 2011, Community Bank of Rockmart had approximately $62.4 million in total assets and $55.9 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $14.5 million. ... Community Bank of Rockmart is the 88th FDIC-insured institution to fail in the nation this year, and the 23rd in Georgia.

It feels like Friday!

by Calculated Risk on 11/10/2011 03:09:00 PM

From Freddie Mac: 30-Year Fixed-Rate Mortgage Averages 3.99 Percent

Freddie Mac today released the results of its Primary Mortgage Market Survey(® (PMMS®), showing average mortgage rates changing little from the previous week amid a mix of economic data reports as the 30-year fixed-rate mortgage averaged 3.99 percent, dropping below 4.00 percent for the second time this year. The 30-year fixed averaged 3.94 percent in the October 6, 2011 survey.

And an update to a a couple of graphs - the first comparing 30 year conforming mortgage rates to the MBA Refinance index (on a monthly basis), and the 2nd graph is weekly comparing the Refinance index to the Ten Year yield.

Click on graph for larger image.

This graph shows the MBA's refinance index (monthly average) and the the 30 year fixed rate mortgage interest rate from the Freddie Mac Primary Mortgage Market Survey®.

The Freddie Mac survey started in 1971. Mortgage rates are currently near the record low for the last 40 years.

It usually takes around a 50 bps decline from the previous mortgage rate low to get a huge refinance boom - and rates might not fall that far - 30 year conforming mortgage rates were at 4.23% in October 2010, so a 50 bps drop would be 3.73%.

The second graph compares refinance activity to the ten year yield.

The ten year yield is below the level during the 2008 financial crisis - thanks to weak economic growth and the European financial crisis.

Even with conforming 30 year mortgage rates slightly under 4%, there still hasn't be a huge pickup in mortgage refinance activity. This is because borrowers who can refinance, already have - and the rest either can't qualify or have negative equity (the new HARP refinance program will help a little).

Earlier:
• Weekly Initial Unemployment Claims decline to 390,000
• Trade Deficit declines in September as Exports increase

by Calculated Risk on 11/10/2011 12:11:00 PM

From RealtyTrac: U.S. Foreclosure Activity Hits 7-Month High in October

RealtyTrac® ... today released its U.S. Foreclosure Market Report™ for October 2011, which shows foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 230,678 U.S. properties in October, a 7 percent increase from the previous month, but still down nearly 31 percent from October 2010.
...
“The October foreclosure numbers continue to show strong signs that foreclosure activity is coming out of the rain delay we’ve been in for the past year as lenders corrected foreclosure paperwork and processing problems,” said James Saccacio, chief executive officer of RealtyTrac.
...
Default notices (NOD, LIS) were filed for the first time on a total of 77,733 U.S. properties in October, a 10 percent increase from September, but still down 23 percent from October 2010. Default notices in states using the judicial process (LIS) reached an 11-month high of 39,282 in October, a 16 percent increase from the previous month, but still down 31 percent from October 2010.
...
Foreclosure auctions (NTS, NFS) were scheduled on 85,321 U.S. properties in October, up 8 percent from the previous month, but still down 38 percent from October 2010.
...
Lenders repossessed a total of 67,624 U.S. properties (REO) in October, a 4 percent increase from the previous month, but still a 27 percent decrease from October 2010.

It appears the pace of foreclosure activity is picking up again. I don't think we will see a huge increase in activity until the mortgage settlement is announced - and that might lead to more modifications too.

Earlier:
• Weekly Initial Unemployment Claims decline to 390,000
• Trade Deficit declines in September as Exports increase

by Calculated Risk on 11/10/2011 09:15:00 AM

The Department of Commerce reports:

[T]otal September exports of $180.4 billion and imports of $223.5 billion resulted in a goods and services deficit of $43.1 billion, down from $44.9 billion in August, revised. September exports were $2.5 billion more than August exports of $177.9 billion. September imports were $0.7 billion more than August imports of $222.8 billion.

The trade deficit was below the consensus forecast of $46.3 billion and the deficit for August was revised down.

The first graph shows the monthly U.S. exports and imports in dollars through September 2011.

Click on graph for larger image.

Exports increased in September, and imports have been mostly moving sideways for the last five months (seasonally adjusted). Exports are well above the pre-recession peak and up 16% compared to September 2010; imports have stalled recently and are up about 12% compared to September 2010.

The second graph shows the U.S. trade deficit, with and without petroleum, through September.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Oil averaged $101.02 per barrel in September, and import oil prices have been declining slowly from $108.70 per barrel in May. The trade deficit with China declined slightly to $28 billion.

Imports have been moving sideways for the last several months - partially due to slightly lower oil prices. However the trade deficit with China continues to be a significant issue. Exports are still trending up.