Frozen

The high-tech companies are well-known for their creative approach to the management of their respective sophisticated workforces. Just recently, Facebook and Apple introduced a new employee benefit – the paid egg freezing – as demand for the procedure grows among working females, and since the procedure has completed its experimental stage and moved into the approved clinical sphere. The cost of the process is measured in tens of thousands of dollars and success is limited. As it often happens, the new initiative backfired immediately; the companies are blamed for encouraging women to put their personal life on hold in favor of careers. More news in the high-tech frontier world comes from Amazon. The company revised downwards its sales growth forecasts for the holiday season and Amazon stock is in turmoil again after recovering some of summer’s decline in response to investors’ demands for more profitability.

The European Union continues battling the challenge of economic disparity between its members. Italy is shaken by the protests due to the astonishing 44.2 percent unemployment rate among younger members of the workforce, and has proposed new labor laws reforms. The economy of the U.K. continued to grow and fellow EU members demanded additional U.K. contribution to the EU budget. The demands are adding to the EU-U.K. drift. First, the U.K. is not eager to make the demanded paymentbecause it is facing uncertainty of future expected losses resulting from the sanctions on trading with Russia. Accounting for direct and indirect influence of the sanctions, Rolls-Royce, one of the biggest U.K. based manufacturing companies, issued its second warning of profits’ drop for this year, negatively affecting their stock performance. Secondly, the British government unveiled a new policy of limiting labor migration from the rest of the EU, which many see as a downslide of the entire European organization.

This past week was big in housing news. Existing Home Sales increased by 2.4 percent, above expectations. However, September 2014 sales declined as compared to September 2013’s by 1.7 percent. New Home Sales were also higher than expected in September, while the startling growth of August was revised downwards sharply.

According to RealtyTrack, a source of housing data, 15 percent of the mortgaged properties in the U.S., representing 8.1 million, are still “underwater,” with loan-to-value ratios of 125 percent or more. The number of “underwater” properties keeps declining; however, the distribution among price categories is very uneven. More than half of the properties in the “less than $50,000” category count towards the sad statistics; the next hard-hit category is between $50,000 and $100,000, with 34 percent of properties’ values way below the attached loan amounts. Houses in the “$500,000 to $2,000,000” range are in the best situation with only 5-6 percent of mortgages seriously exceeding property values.

Inflation, as measured by the Consumer Price Index, was marginally above consensus – at 0.1 percent. The PMI Manufacturing Index flash fell below the expected value, giving a shadowy outlook for the condition of the industrial sector. The New Unemployment Claims number grew last week, but was reported slightly below consensus.

Detroit seems to have found a cure to its problems in the housing sector and employment situation. The city is using a $1bn fund to demolish abandoned houses within its municipal limits. The project is moving at the rate of 200 houses per week with a total of 40,000 houses awaiting destruction.

Mortgage rates for Fixed rate 30-year and 15-year loans and 5/1 ARMs declined slightly this past week. According to Freddie Mac’s survey, 30-year rates averaged 3.92 percent and 5/1-year ARMs averaged at 2.91 percent. The Mortgage Credit Availability Index computed by the Mortgage Bankers Association remained unchanged in September.

This coming week is rich in economic news starting with Pending Home Sales, a leading indicator of housing activity. The FOMC Meeting announcement on Wednesday will provide guidance for future governmental economic policy. It will be followed by the third quarter GDP readings and Jobless Claims on Thursday. Consumer Confidence, Consumer Sentiment and Personal Income and Outlays will give us a feel of current and future consumer spending. The Index Dallas Fed Manufacturing Survey, Durable Goods Orders and Chicago PMI will shed some light on future industrial sector developments. While fall colors start reaching even Southern states, don’t get spooked this coming Friday. Stay tuned!

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