2017-03-27telegraph.co.uk

Data from the US Federal Reserve shows that the $2 trillion market for commercial and industrial loans peaked in December. The sector has weakened abruptly as lenders tighten credit, especially for non-residential property. Over the last three months it has dropped at a rate of 5.4pc on annual basis, a pace of decline not seen since December 2008.

The deterioration in the broader $9 trillion market for loans and leases has been less dramatic but it too is shrinking, falling at a 1.6pc rate on a three-month basis. "Corporate lending has ground to a halt and I am staggered that the Fed is raising rates. They have made a very big mistake," said Patrick Perret-Green from AdMacro.

... Credit has tended to pick up signs of trouble several weeks before equity markets in recent episodes of financial stress... Monetary tightening in the US so far this cycle has been equal to 13 rate rises under the Fed's Wu-Xia model, which includes the effects of withdrawing stimulus from quantitative easing. Nobody knows where the pain threshold lies in a global financial system that is more leveraged than at any time in history, including Fed officials themselves.

... Simon Ward from Henderson Global Investors said his early warning indicator - real six-month M1 money - turned negative in February. It has ticked up a little in March but not enough to prevent what would normally be an economic relapse later this year.

... Kevin Gaynor from Nomura says his model of asset pricing suggests markets are in effect assuming global growth of 5pc and earnings increases of 30pc a year. These are heroic. "There is a time decay on this new temporary equilibrium," he notes acidly.



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