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News Wrap | Scott Dawson
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U.S. existing homes sales plunge more than expected in July

RBC reports that existing home sales in the US plunged a disappointing -27.2% in July to 3.83 million annualized units from the previous month’s downwardly revised 5.26 million (initially reported as 5.37million) level. The drop was well below market expectations for a decline to 4.65 million annualized units. Home prices, however, increased, with the median price edging up 0.7% relative to July 2009, matching the annual pace of increase in June. Read more:

Bank of Canada publishes working paper

This paper presents a dynamic general equilibrium model where asymmetric information about asset quality leads to asset illiquidity. Banking arises endogenously in this environment as banks can pool illiquid assets to average out their idiosyncratic qualities and issue liquid liabilities backed by pooled assets whose total quality is public information. Moreover, the liquidity mismatch in banks’ balance sheets leads to endogenous bank capital (outside equity) requirements for preventing bank runs. The model indicates that banking has both positive and negative effects on long-run economic growth and that business-cycle dynamics of asset prices, asset illiquidity and bank capital requirements are interconnected. Read more:

Canada’s TSX slides on weak U.S. economic data

SAN FRANCISCO (MarketWatch) — Canadian stocks extended losses on Wednesday on a weaker-than-expected rise in U.S. durable-goods orders as well as news that sales of new homes across the border fell to all-time record low. Read more: