By Milounee Purohit and Anant Chandak

BENGALURU (Reuters) - The Indian rupee will trade near record lows against the dollar over the coming months, according to a Reuters poll of FX strategists who also said the Reserve Bank of India would likely intervene less in the coming year to support the currency.

India's economy is expected to expand 6.3% this fiscal year, the fastest-growing major economy in the world. But the rupee is not reflecting that optimism, having hit a record low of 83.29/$ earlier this month.

Thanks to the RBI's regular interventions in currency markets to arrest any sudden moves, the rupee has fared better than most of its Asian peers and was down just 0.6% for the year.

Although the recent decline in U.S. Treasury yields and weaker-than-expected U.S. economic data took some of the strength out of the dollar, the rupee was not expected to benefit much yet.

The latest Reuters poll of 42 foreign exchange analysts taken Nov. 3-7 suggested the rupee would trade around its current level of 83.25/$ in a month and 83.00/$ in three months.

However, over 30% of strategists, 13 of 42, still expect the rupee to touch a new low by end-January.

"We're not expecting it to rally as strongly as some of the other currencies that would be more freely-floating... because it's already stronger than perhaps fundamentally it would have been," said Robert Carnell, regional head of research, Asia Pacific at ING.

The rupee was then forecast to gain nearly 1% to 82.50/$ in six months and around 1.5% to 82.00/$ in a year. Forecasts for the 12-month period ranged from 80.00/$ to 85.67/$.

With most major central banks likely done with their policy tightening cycles, analysts said the dollar's dream run over the past couple of years may have come to an end, putting less pressure on the RBI to intervene in currency markets.

Last month, RBI Governor Shaktikanta Das defended the regular use of its $586 billion in foreign exchange reserves saying it was necessary to prevent excessive volatility. The central bank sold about $23 billion in the last four months.

A near 70% majority of strategists, 16 of 23, who answered an additional question said RBI intervention would decrease over the coming year. The rest said it would increase.

"With a reversal of capital flows next year, the RBI's intervention in the currency market should reduce," said Suman Chowdhury, chief economist at Acuite Ratings and Research.

"Once you have a little more clarity on the Fed rate trajectory, U.S. Treasury yields are likely to come down further. If oil prices also don't see any further escalation then we are expecting that the (rupee) rate will stabilize."

(For other stories from the November Reuters foreign exchange poll:)

By Devayani Sathyan and Vuyani Ndaba

BENGALURU/JOHANNESBURG (Reuters) - Emerging market currencies will take well into next year to start making noticeable gains against a retreating U.S. dollar, despite a growing view the interest rate cycle has peaked, a Reuters poll of FX strategists showed.

After getting battered for most of 2023, emerging market (EM) currencies have made modest gains against the dollar after the Federal Reserve held interest rates steady last week and data suggested the U.S. economy might finally be slowing.

That dollar weakening trend was likely to hold in the near-term as a majority of analysts in the Nov. 3-7 Reuters poll expected the dollar to trade lower by year-end.

However, with most EM central banks expected to follow the Fed and cut rates next year, their respective currencies were unlikely to recoup double-digit losses they have accumulated over the past couple of years.

"We've seen already some pretty sharp gains last week, but the recent gains aren't extending because there is still uncertainty about the Fed ... and at the same time the U.S. is still performing better than most other economies," said Mitul Kotecha, Head of FX & EM Macro Strategy Asia at Barclays.

"So it's difficult to see the EM currencies recoup some of the sharp losses that we've seen in the last few months. That said, we do expect some gains, it's just going to be a bit more of a gradual path."

This excludes the Russian rouble, which has lost 27% this year, and the Turkish lira, which is down 52%.

Only a few Asian currencies, such as the Indian rupee, Thai baht, and South Korean won were expected to recoup their losses by late 2024. In the near term, the rupee is forecast to trade in a narrow range.

   Although EM currencies gained at the beginning of 2023 and investors brimmed with positivity after China's post-COVID reopening, economic performance in the world's second largest economy has been mostly underwhelming.

Indeed, the tightly-controlled Chinese yuan was forecast to only recoup slightly more than half of its 2023 losses. It has fallen over 5% this year.

The South African rand is set to gain less than 1% while the Turkish lira is set to fall around 16% in a year.

Latin America's stand-out currencies, the Brazilian real and Mexican peso, have gained around 8% and 11% respectively since the year began, although some of their central banks have already begun cutting rates.

The peso is expected to lose around 4.5% while the real is seen losing just over 2% in 12 months.

"Easier Fed monetary policy should also take some pressure off select emerging market currencies in the second half of next year," noted Nick Bennenbroek, international economist at Wells Fargo.

(For other stories from the November Reuters foreign exchange poll:)

By Michael S. Derby

NEW YORK (Reuters) - U.S. total household debt levels rose in the third quarter amid strong growth in credit card borrowings fueled by a hot economy, although there were mounting signs some borrowers are facing increased challenges managing the money they've borrowed, a report from the Federal Reserve Bank of New York released on Tuesday said.

In its quarterly report, the bank said overall debt levels increased by 1.3% during the third quarter to a level of $17.29 trillion. And in that rise, credit card borrowing levels rose by 4.7% to $1.08 trillion, with the bank noting that over the last year there's been a $154 billion increase in these types of balances, the largest since the New York Fed began tracking such data in 1999.

“Credit card balances experienced a large jump in the third quarter, consistent with strong consumer spending and real GDP growth,” Donghoon Lee, a New York Fed economist, said in a press release accompanying the report.

U.S. economic activity in the third quarter took place at a blistering pace few economists expect to be repeated in the final three months of the year. Overall activity rose at a well- above-trend pace of 4.9%, the fastest such gain in two years, in an environment where the Fed was raising interest rates and overall borrowing costs broadly rose.

The surge in borrowing costs has waylaid activity in the housing market amid the highest mortgage rates in decades, and the landscape has fueled worries that many Americans will struggle to manage their debt, especially as high levels of savings during the coronavirus pandemic run down. The New York Fed report found credit issues are rising, albeit from low levels.

STORM CLOUDS

Overall debt delinquency increased by 3% as of September from a 2.6% increase in the second quarter, the report said, while still standing below the 4.7% delinquency rate seen in the fourth quarter of 2019, just ahead of the pandemic’s arrival.

The overall flow of debt moving into delinquency stood at 1.28% in the third quarter, compared with 0.94% in the third quarter of last year. The report said increases in credit card delinquency rates were most pronounced for thirtysomething borrowers.

“The continued rise in credit card delinquency rates is broad-based across area income and region, but particularly pronounced among millennials and those with auto loans or student loans,” the economist noted.

Daniel Silver, an economist with J.P. Morgan, said that in terms of the rising credit issues, "this looks consistent with a softening trajectory for consumer spending, but not a particularly bad one."

In a blog posting that came with the report, New York Fed economists said the rise in credit woes is puzzling given the generally solid state of the economy.

Pinning an explanation on the delinquency rise is “difficult” and “whether this is a consequence of shifts in lending, overextension, or deeper economic distress associated with higher borrowing costs and price pressures is an important topic for further research," the post said.

In comments made on Monday, Fed governor Lisa Cook said she wasn't worried about debt issues on the household level, while noting "of course, we are seeing emerging signs of stress for households with lower credit scores, and individual borrowers may struggle with debt burdens in the face of economic hardships."

The New York Fed report found that overall student loan debt rose by $30 billion to $1.6 trillion in the third quarter. The bank’s data on this type of borrowing arrives after the restart of student loan debt payments, which had been put on hold during the pandemic. The resumption of those payments has been a source of concern, but recent New York Fed research has suggested only modest economic headwinds are likely to result.

Newly created mortgages totaled $386 billion in the third quarter, while the overall level of mortgage balances rose by $126 billion to $12.14 trillion as of the end of September.

The report said auto loan balance were up by $13 billion in the third quarter at $1.6 trillion, “continuing the upward trajectory that has been in place since 2011.”

By Joice Alves and Danilo Masoni

LONDON/MILAN (Reuters) - Italian stocks are trading at their deepest discount in 35 years compared to world shares as investors fret over the fiscal outlook in one of Europe's most indebted economies, although some reckon the shares are too cheap to ignore.

While Italian equities have historically been cheaper than global peers, their discount has now widened to 50%, the biggest gap since 1988, and has held at that level for a couple of months. This is twice as wide as the average gap seen over the past two decades.

Yes, Milan's blue-chip index has rallied this year as it is geared heavily towards banking stocks that have benefited from the steepest rise in euro area interest rates on record.

But domestically focused companies in sectors such as consumers and industrials have been hurt by an aging population, debt at over 100% of GDP and two decades of near-zero economic growth that was only briefly interrupted by a post-COVID rebound.

That has left Italian equities overall more cheaply valued than even battered UK shares, which are trading at a 33% discount to global peers.

Italy's domestic stock market "is not particularly an area I want to be exposed to," said Chris Hiorns, head of multi-asset and European equities at EdenTree, citing concern about Italy's fiscal outlook.

Recent cuts to economic growth and increases to budget deficit forecasts have revived concern about potential sovereign stress, pushing the premium investors demand to hold 10-year Italian bonds over safer Germany above 200 basis points (bps) last month.

That gap has narrowed but remains vulnerable. A test looms on Friday when Fitch reviews Italy's BBB credit rating and stable outlook.

"A change in the outlook cannot be ruled out, given lower growth, higher interest rate expenses and the deterioration in Italy's fiscal position," Barclays said in a note.

Goldman Sachs estimates that each 10 bps rise in sovereign spreads takes around 2% off Italian bank shares and 1.5% off the FTSE MIB index. It advises avoiding the blue chip index after its outperformance.

Italy's funding needs are being further complicated by its difficulties in meeting conditions set by the European Commission in return for billions of euros of post-pandemic recovery funds.

Conflict in Ukraine and in the Middle East meanwhile threaten to spark a fresh surge in energy prices and weaken growth.

The number of outstanding units in BlackRock (NYSE:BLK)'s iShares MSCI Italy ETF has more than halved to 8.6 million from 18.9 million in October 2021. Its MSCI Europe ETF has seen the number of units fall by less than 10% over the same period.

"RIDICULOUS MULTIPLES"

While Italy's weak economic outlook and high debt suggest a significant re-rating of shares is unlikely anytime soon, investors expected some clawing back given just how deeply discounted some parts of the market are.

The FTSE Italia Star index, tracking companies with a market cap of up to 1 billion euros ($1.07 billion), has fallen 10% so far in 2023 after last year's near 30% plunge. By comparison, the FTSE mid-cap index is down 5% this year.

Smaller Italian stocks have been hit by outflows due to the end of a government-sponsored scheme to promote investment into small-sized domestic stocks, said Giuseppe Sersale, strategist and portfolio manager at Anthilia in Milan.

"Many companies are trading on ridiculous multiples. A window of value is opening up on small caps, which is worth seizing," he said.

Andrea Scauri, senior portfolio manager at asset manager Lemanik, said high visibility on earnings due to elevated rates and stronger balance sheets make Italian banks less vulnerable to debt jitters than before.

"If the spread widens, this will have a short-term impact," he said.

Scauri owns shares in smaller Italian lenders such as Banco BPM and Monte dei Paschi, whose cheaper valuations make them more attractive than larger banks, he said.

Banco BPM shares are trading at around 0.55 times its price-to-book value and Monte dei Paschi at 0.39 times, much cheaper than UniCredit, Italy's No.2 lender by market value and trading at 0.66 times, according to LSEG Datastream.

UniCredit shares are up almost 80% this year and among the best performing euro zone banking shares.

Fidelity International portfolio manager Alberto Chiandetti, said he was chasing opportunities in battered industrials and consumer sectors in the FTSE Italia Star index.

"In many cases, valuations have already factored in the economic slowdown, while not reflecting the value and growth that many of these companies will have in the coming years," he added.

By Joice Alves and Danilo Masoni

LONDON/MILAN (Reuters) - Italian stocks are trading at their deepest discount in 35 years compared to world shares as investors fret over the fiscal outlook in one of Europe's most indebted economies, although some reckon the shares are too cheap to ignore.

While Italian equities have historically been cheaper than global peers, their discount has now widened to 50%, the biggest gap since 1988, and has held at that level for a couple of months. This is twice as wide as the average gap seen over the past two decades.

Yes, Milan's blue-chip index has rallied this year as it is geared heavily towards banking stocks that have benefited from the steepest rise in euro area interest rates on record.

But domestically focused companies in sectors such as consumers and industrials have been hurt by an aging population, debt at over 100% of GDP and two decades of near-zero economic growth that was only briefly interrupted by a post-COVID rebound.

That has left Italian equities overall more cheaply valued than even battered UK shares, which are trading at a 33% discount to global peers.

Italy's domestic stock market "is not particularly an area I want to be exposed to," said Chris Hiorns, head of multi-asset and European equities at EdenTree, citing concern about Italy's fiscal outlook.

Recent cuts to economic growth and increases to budget deficit forecasts have revived concern about potential sovereign stress, pushing the premium investors demand to hold 10-year Italian bonds over safer Germany above 200 basis points (bps) last month.

That gap has narrowed but remains vulnerable. A test looms on Friday when Fitch reviews Italy's BBB credit rating and stable outlook.

"A change in the outlook cannot be ruled out, given lower growth, higher interest rate expenses and the deterioration in Italy's fiscal position," Barclays said in a note.

Goldman Sachs estimates that each 10 bps rise in sovereign spreads takes around 2% off Italian bank shares and 1.5% off the FTSE MIB index. It advises avoiding the blue chip index after its outperformance.

Italy's funding needs are being further complicated by its difficulties in meeting conditions set by the European Commission in return for billions of euros of post-pandemic recovery funds.

Conflict in Ukraine and in the Middle East meanwhile threaten to spark a fresh surge in energy prices and weaken growth.

The number of outstanding units in BlackRock (NYSE:BLK)'s iShares MSCI Italy ETF has more than halved to 8.6 million from 18.9 million in October 2021. Its MSCI Europe ETF has seen the number of units fall by less than 10% over the same period.

"RIDICULOUS MULTIPLES"

While Italy's weak economic outlook and high debt suggest a significant re-rating of shares is unlikely anytime soon, investors expected some clawing back given just how deeply discounted some parts of the market are.

The FTSE Italia Star index, tracking companies with a market cap of up to 1 billion euros ($1.07 billion), has fallen 10% so far in 2023 after last year's near 30% plunge. By comparison, the FTSE mid-cap index is down 5% this year.

Smaller Italian stocks have been hit by outflows due to the end of a government-sponsored scheme to promote investment into small-sized domestic stocks, said Giuseppe Sersale, strategist and portfolio manager at Anthilia in Milan.

"Many companies are trading on ridiculous multiples. A window of value is opening up on small caps, which is worth seizing," he said.

Andrea Scauri, senior portfolio manager at asset manager Lemanik, said high visibility on earnings due to elevated rates and stronger balance sheets make Italian banks less vulnerable to debt jitters than before.

"If the spread widens, this will have a short-term impact," he said.

Scauri owns shares in smaller Italian lenders such as Banco BPM and Monte dei Paschi, whose cheaper valuations make them more attractive than larger banks, he said.

Banco BPM shares are trading at around 0.55 times its price-to-book value and Monte dei Paschi at 0.39 times, much cheaper than UniCredit, Italy's No.2 lender by market value and trading at 0.66 times, according to LSEG Datastream.

UniCredit shares are up almost 80% this year and among the best performing euro zone banking shares.

Fidelity International portfolio manager Alberto Chiandetti, said he was chasing opportunities in battered industrials and consumer sectors in the FTSE Italia Star index.

"In many cases, valuations have already factored in the economic slowdown, while not reflecting the value and growth that many of these companies will have in the coming years," he added.

By Wayne Cole

SYDNEY (Reuters) -Australia's central bank raised interest rates to a 12-year high on Tuesday, ending four months of steady policy, but left it open on whether even more tightening would be needed to bring inflation to heel.

Wrapping up its November policy meeting, the Reserve Bank of Australia (RBA) raised its cash rate by 25 basis points to 4.35%, saying recent data suggested there was a risk inflation would remain higher for longer.

"Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks," RBA Governor Michele Bullock said in a statement.

This was a step back from the October decision which stated that some further tightening "may be required", and was taken by markets as a sign this might be the last hike of the cycle.

As a result, the local dollar slid 0.8% to $0.6435 and bond futures rallied as investors lengthened the odds on a further rise in December.

"It was a dovish hike...it's not pointing to any immediate need for a follow-up," said Rob Thompson, rates strategist at RBC Capital Markets.

"You'd think they'd have opened the door to a bit more than this, but they are just trying to do as little as possible. The hurdle to hike is high."

Markets had favoured a move this week given policy makers had warned they had little tolerance for inflation which had surprised on the high side in the third quarter. [AU/INT]

INFLATION PROVES STUBBORN

This was Bullock's first rate change since taking over as governor in September, and could go some way to burnish her inflation-fighting credentials.

Economic growth has already slowed to a two-year low of 2.1% and the RBA sees it approaching 1% in 2024 as the full impact of higher rates bites.

Rates have now risen by 425 basis points since May last year, adding thousands of dollars to average mortgage repayments in easily the most aggressive cycle on record for the RBA.

A hike had seemed possible since consumer price inflation topped forecasts in the third quarter to run at 5.4%, well above the RBA's long term target range of 2-3%.

Bullock noted the central bank's own forecasts for CPI had been lifted to 3.5% by the end of 2024, from 3.3%, while inflation would only reach the top of the target band by the end of 2025.

The hike puts the RBA in the odd position of being one of the very few developed world central banks still tightening, with markets convinced rates in the United States, Canada and Europe have peaked.

The RBA Board had been prepared to tolerate a somewhat slower decline in inflation in order to keep Australia at full employment, an economic feat not achieved since the 1950s.

Their patience ran out as inflation proved stickier than hoped in the service sector, while house prices rebounded to record highs and unemployment stayed historically low at 3.6%.

BEIJING (Reuters) -China's imports unexpectedly grew in October while exports contracted at a quicker pace, in a mixed set of indicators that showed the recovery in the world's second-largest economy remains uneven amid multiple challenges at home and abroad.

Recent indicators suggest Beijing's support measures since June are helping bolster a tentative recovery, although a protracted property crisis and soft global demand continue to dog policymakers heading into 2024.

Exports shrank 6.4% from a year earlier in October, customs data showed on Tuesday, faster than a 6.2% decline in September and worse than a 3.3% fall expected in a Reuters poll. Imports rose 3.0%, dashing forecasts for a 4.8% contraction and swinging from a 6.2% fall in September. Imports snapped 11 straight months of decline.

"The figures are in contrast to market expectations. The bad exports data may hit market confidence as we had expected the supply chain of exports to recover," said Zhou Hao, economist at Guotai Junan International.

"The significant improvement in imports may come from rising domestic demand, in particular a demand to replenish stocks."

The Baltic Dry Index, a bellwether gauge of global trade, hit its lowest since December 2020 in October, due to congestion in North American and European ports.

However, in a sign trade is finding some footing, South Korean exports to China fell at their slowest pace in 13 months in October.

China posted a trade surplus of $56.53 billion in October, compared with a $82.00 billion surplus expected in the poll and $77.71 billion in September.

Analysts say it is too early to tell whether recent policy support will be enough to shore up domestic demand, with property, unemployment and weak household and business confidence threatening a sustainable rebound.

China's manufacturing activity unexpectedly contracted in October, data showed last week, complicating policymakers' efforts to revive growth.

TOKYO (Reuters) -Japan's real wages slipped in September for an 18th month, while consumer spending extended a months-long decline, with rising prices squeezing households' purchasing power, and likely to add to pressure from labour groups for higher wage increases.

Financial markets worldwide pay close attention to the wage trends in the world's third-largest economy. The Bank of Japan regards sustainable pay increases as important for unwinding its ultra-loose monetary stimulus.

Inflation-adjusted real wages, a barometer of consumer purchasing power, dropped in September by 2.4% from a year earlier after a revised 2.8% fall the month before, data from the Ministry of Health, Labour and Welfare showed.

The consumer inflation rate officials use to calculate real wages, which includes fresh food prices but excludes owners' equivalent rent, slowed to 3.6%, the lowest since September last year.

Still, nominal pay growth in September was 1.2%, after a downward revision of 0.8% in August and only slightly better than in July.

Japan's largest labour organisation Rengo is expected to demand pay increases of 5% or more, while the largest industrial union, UA Zensen, will seek a 6% wage increase in negotiations early next year.

Prime Minister Fumio Kishida's government last week drew up a 17 trillion yen ($113.72 billion) economic stimulus package that includes slashing annual income tax and other taxes by 40,000 yen ($267.58) per person and paying 70,000 yen to low-income households.

Special payments fell 6% year-on-year in September after a revised 6.3% decline in August. The indicator tends to be volatile in months outside the twice-a-year bonus seasons of November and January and June to August.

Base salary growth in September advanced by 1.4% year-on-year, from a revised 1.2% increase the previous month, the data showed.

Overtime pay, a gauge of business activity, went up in September by 0.7% year-on-year, after a revised 0.2% gain in August.

SLUGGISH SPENDING

Household spending decreased 2.8% in September from a year earlier, falling for seven months in a row, separate data on Tuesday showed, roughly in line with the median market forecast for a 2.7% decline.

On a seasonally adjusted, month-on-month basis, household spending climbed 0.3%, versus an estimated 0.4% fall.

Expenses in eating out, transportation and automobile-related spending went up due to an increase in outings, while spending on food, housing, furniture and household goods decreased partly due to rising prices, a government official said.

Major companies agreed to average pay hikes of 3.58% this year, the highest increase in 30 years. Average Japanese workers' wages had remained virtually flat since the asset-bubble burst in the early 1990s until this year.

India's nominal GDP is expected to accelerate at a rate of 12.4% year over year in the fiscal year 2025, surpassing China, the US, and the Euro Area, according to a recent report by Morgan Stanley. This growth would propel India to become the world's third-largest economy with a GDP of $5 trillion by 2027.

The report also predicts that India's share of global growth contribution will increase from 10% in 2021 to 17% in the period from 2023 to 2028. This growth is backed by an average annual growth rate of 6.6% over the fiscal years 2024-28. Key factors driving this impressive economic performance include an upturn in public capital expenditure (capex) and a surge in private capex.

Policy reforms since 2019, such as corporate tax cuts and the introduction of the Production-Linked Incentive (PLI) scheme, have attracted investments and sparked structural growth. Despite a decline in Foreign Direct Investment (FDI) inflows due to weakening global GDP and trade growth, India has managed to increase its share of global FDI from 2.4% in Q4 2017 to 4.2% in Q1 2023.

Analysts from JP Morgan forecasted a slightly lower growth rate for India's economy this fiscal year at between 5.5%-6%, below the Reserve Bank of India's (RBI) prediction of 6.5%. Despite facing challenges such as high interest rates, geopolitical unrest, and sluggish demand, the analysts suggest that a growth rate of 5.5% would still signify an extraordinary year for India in FY25.

The World Bank shares these concerns, estimating India's GDP growth at 6.3% for FY24 after a 7.2% increase in FY23. The RBI has reaffirmed its GDP growth forecast of 6.5% for FY24 and FY25 but revised its quarterly projections downwards for the forthcoming fiscal year. Meanwhile, Nomura expects India's GDP growth to slow down to 5.6% next year from 5.9% in FY24.

The April-June GDP data showed a 7.8% expansion in the Indian economy, aligning with economists' expectations but falling short of the RBI's 8% estimate. Aziz emphasized India's significant dependence on global factors, arguing that domestic factors and private investment alone cannot sustain its growth.

Despite these concerns, RBI Governor Shaktikanta Das anticipates Q2 GDP growth for FY24 to exceed expectations, based on early indicators. This comes despite what he referred to as the best global year we've seen in a long time.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

BERLIN (Reuters) - Germany's residential construction sector was again hit by a wave of cancellations in October, according to a survey published on Monday that showed a record number of firms reporting abandoned projects.

In October, 22.2% percent of companies reported cancelled projects, up from 21.4% the previous month, the Ifo economic institute said.

"It's getting worse all the time, with more and more projects failing due to higher interest rates and elevated construction prices," says Klaus Wohlrabe, Ifo head of surveys.

"In residential construction, new business remains very low and companies' order backlogs are diminishing."

The number of companies reporting a lack of orders also increased in October, to 48.7% of firms from 46.6% in September.

A year ago, in October 2022, that proportion was just 18.7%.

"Nearly half of all residential construction companies are now suffering from a lack of orders, and that number is growing every month," said Wohlrabe.

The real-estate sector was a bedrock of Germany's livelihood for years. Fuelled by low interest rates, billions were funnelled into property, which was viewed as stable and safe.

Now a sharp rise in rates and building costs has put an end to the run, tipping developers into insolvency as bank financing dries up, deals freeze and prices fall.