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U.S. soldier returns home from the war, to foreclosure Add to ...

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The U.S. foreclosure crisis Aaron Collette returned home from the war last night to find his family home in foreclosure.

His father, Tim, has been fighting Chase Bank, but the bank foreclosed yesterday and took possession of the home in Bend, Ore., despite the protests of more than 100,000 people who signed an online petition.

Specialist Collette, home from Iraq on leave, is a symbol of America's depressed housing market and a foreclosure crisis that has driven far too many people from their homes. On the one hand, he got a motorcyle escort home down Highway 97, according to local news reports. On the other, it's not home any longer.

There is of course more than one side to this story, and the point of this isn't to take a side, simply to point out the sad conditions of people like Spc. Collette and his father, who bought the house about four years ago but ran into trouble when the recession pounded his flooring business.

In the first six months of the year, according to RealtyTrac of California, almost 1.2 million properties were the subject of foreclosure filings. That's actually down from the prior six months, and even the the same period last year, but all for the wrong reasons.

“It would be nice to report that foreclosure activity is dropping as a result of improvements in the economy or the housing market,” RealtyTrac's chief executive offier James Saccacio said in mid-July.

“Unfortunately, with unemployment rates inching back up, consumer confidence weak and home sales and prices continuing to languish, this doesn’t appear to be the case," he said in a statement that compiled the lastest statistics.

“Processing and procedural delays are pushing foreclosures further and further out – we estimate that as many as one million foreclosure actions that should have taken place in 2011 will now happen in 2012, or perhaps even later. This casts an ominous shadow over the housing market, where recovery is unlikely to happen until the current and forthcoming inventory of distressed properties can be whittled down to a manageable number.”

France sparks global fears France became the new flash point in the euro debt crisis today, sending shudders through global markets on yet another day of turmoil. The market plunge that hammered shares of Europe's banks and spread into North America, though, was driven by speculation and rumour.

Europe's major markets fell by between 3 per cent and 5.5 per cent, while, in New York, the Dow Jones industrial average shed more than 500 points. Toronto's S&P/TSX composite index somehow survived the carnage, finishing out with a gain.

"So much for the rally," said sales trader Will Hedden of IG Index. "The dead cats have stopped bouncing as the market rumour mill goes into overdrive."

The speculation over France surrounds the country's triple-A credit rating while the rumours involve the health of its financial institutions, which are heavily exposed to European debt. Major banks like Societe Generale fell sharply, as did other banks across Europe.

"Initially this was a result of rumours that France would be the next major power to lose triple-A status," said Mr. Hedden. Confirmation from all three major rating agencies that this was not the case didn't stop the selloff. Now the rumour is that a French bank is selling its gold reserves to fight off the current crisis, and the share prices of said banks now speak for themselves."

The denials didn't stop a bloodbath.

"U.K. and German markets, after spending most of the morning in positive territory, plunged this afternoon on rumours of a French sovereign downgrade amidst concerns about the fiscal health of the French banking system, particularly Societe Generale," said CMC Markets analyst Michael Hewson.

"The French bank has denied all rumours pertaining to its fiscal health, while ratings agencies have reiterated the triple-A sovereign rating of France with a stable outlook. Italian and French markets have gone into a tailspin with Italy's market falling the most since May 2010. With investors so nervous and markets so feral, any rumour or doubt seems to be getting amplified as volatility and fear increases."

Despite the fact that today's actions are being driven by fear, wary investors are indeed beginning to look a bit more closely at France, the biggest economy yet to be affected by the spreading crisis in the euro zone.

As the second-largest economy in the 17-member monetary union, the shift to France has huge implications, although today's action may be driven more by fear than reality.

The situation in France is, of course, nothing like that of the weaker nations in the euro zone, where Greece, Portugal and Ireland have resorted to bailouts. But "it looks like some bond investors have become more nervous about France's fiscal outlook," said senior economist Sal Guatieri of BMO Nesbitt Burns.

France's debt-to-GDP ratio has swelled to more than 80 per cent from about 65 per cent just a few years ago.

Mr. Guatieri noted the widening spread in the yields of French and German bonds, though part of that is a flight to safety into Germany. European markets also plunged as investors worried the country could lose its triple-A ratings, though the major credit raters have said otherwise.

The European Central Bank again today purchased Italian and Spanish bonds in an ongoing effort to stop the crisis from spreading further. While France shows no signs yet of succumbing to the debt troubles, it is unsettling to watch as the virus jumps from border to border.

"The ECB’s purchases of Spanish and Italian bonds this week have greatly lowered government borrowing costs, stemming contagion fears," Mr. Guatieri said. "Unfortunately, still-nervous bond investors have shifted their sights on triple-A France, where credit spreads against Germany have blown out to euro-era highs."

For a look at the spread on bond yields, see the accompanying infographic or click here.

Whither interest rates The Federal Reserve took a page from the Bank of Canada, and in doing so will no doubt affect Canadian interest rates.

The U.S. central bank said yesterday it believes its benchmark rate will remain at an historic low near zero until mid-2013. That's similar to what the Bank of Canada did during the depths of the recession, when it gave markets some certainty with a timeline on rates.

As The Globe and Mail's Boyd Erman reports, the Federal Open Market Committee, the rate-setting panel, also painted a bleaker outlook for the U.S. economy, which also has implications for Canada's central bank and Governor Mark Carney.

"With the Fed on hold for as far as the eye can see, there is now even less pressure on the Bank of Canada to move on rates any time soon," said Douglas Porter, deputy chief economist at BMO Nesbitt Burns.

"The mayhem in equities in recent weeks, and the subsequent marking down of the global economic outlook, had already pushed back rate expectations markedly in any event ... It now appears highly unlikely that the Bank of Canada will be hiking rates in 2011, and may wait well into 2012 if the North American economy does not pick up relatively quickly."

RBC strategists Mark Chandler and Ian Pollick agreed.

"In terms of economic implications, a more downbeat assessment of U.S. growth will, at some point, eat into the pace of advance in our domestic economy," they said. " With respect to monetary policy, the main result of an FOMC on hold for for the next two years effectively limits the pace at which trend tightening can resume."

The Bank of England today also cut its forecast for the year.

Swiss takes new currency steps Switzerland's central bank moved again today to hold down the value of its surging franc.

Among the steps, the Swiss National Bank said it would markedly boost liquidity in the money market and expand bank sight deposit deposits, meaning, overall, that it will flood the market with francs.

The central bank is trying to push interest rates down even further, said Camilla Sutton, Scotia Capital's chief currency strategist.

Like the Japanese yen, the franc is attracting investors as a haven currency, driving it up to where the central bank deems it to be massively overvalued.

Ms. Sutton said she suspects the central bank's actions will have "only a minor impact" on the franc's rapid rise.

China surplus widens China's trade surplus has hit its highest level in more than two years, buoying hopes that there's still some spunk in the global economy amid an increasingly gloomy outlook.

The surplus rose in July to $31.5-billion (U.S.), as exports climbed 20.4 per cent from a year earlier, and imports 22.9 per cent, Carolynne Wheeler reports from Beijing.

The widening surplus could again spark criticism of how China manages its yuan, which strengthened today to a record against the U.S. dollar.

While it's good news from the global recovery, some economists are still wary.

"Overall, today’s trade data provide further evidence that China has avoided a hard landing," said Qinwei Wang of Capital Economics.

"However, the increase in the trade surplus to its highest level in more than two years ... is a reminder that China is not supporting growth elsewhere in the world. If we are right that commodity prices will fall further in coming months, then China’s surplus is likely to become even greater."

Quebecor slips Canada's Quebecor Inc. posted a dip in second-quarter profit today, though revenue climbed 6 per cent from a year earlier.

The media giant earned $55.2-million in the quarter, or 86 cents a share, basic, down from $60.8-million or 95 cents a year earlier. Revenue increased to $1.05-billion.

“Attesting to the success of the corporation's investment and development strategy, revenues grew in all business segments despite aggressive competition in many of those segments," chief executive officer Pierre Karl Peladeau said in a statement.

Analyst Maher Yaghi of Desjardins, whose price target on Quebecor shares is $39, is keen on the stock.

"With the stock having declined from its highs, we believe that valuation, as well as improving cash flow and profitability metrics in 2012, should offer good support for the stock," he said.

"While Quebecor’s balance sheet leverage is more aggressive vs. peers, we look favourably on its decision to invest in wireless, which should deliver substantial long-term growth."

In International Business today The global slowdown may stifle oil demand growth next year, the West’s energy watchdog said today, warning that tightening supplies could still spur yet more oil price volatility. Dmitry Zhdannikov and Christopher Johnson of Reuters report from London.

In Economy Lab today Richard Gilbert examines the controversy of how inflation could address the numerous challenges faced in the U.S.

In Personal Finance today The market’s wild swings mean retirees need a steady income stream that stocks and bonds may not provide.

On my diet the money saver is beans, which are inexpensive, says Preet Banerjee.

From today's Report on Business

 

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