The Institute of Supply Manufactures Manufacturing Index gained for a 4th month in June up 1.9 points on strength in all subcomponents. Construction spending continued to slip in May falling .8% from a downwardly revised April. Spending on single family residential, -1.3% and a 3rd consecutive decline, and commercial construction down .7% and building on April’s fractional decline shows the beginnings of a potentially disturbing trend as real estate, also showing cracks, and construction tend to lead the economy into and out of recession and is one of the few real pillars of strength this time round. CoStar reports that commercial real estate prices increased in May with its US Composite Index up 1.1%, this index is now a stone’s throw from its mid-2007 high.
The previous financial crisis was ushered in when Lehman Brothers and Bear Stearns failed. Fast forward to the present and it appears that Deutsche Bank fresh off its latest stress test failure, long struggling and financially weak, whose shares have hit a new low considerably below that seen in 2008 could well be the next domino to fall post Brexit. A balance sheet laden with derivatives, debt and liabilities doesn’t help either. Additionally, Deutsche Bank carries significant risk of contagion due to its interconnectedness in the global financial system.
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