While you were sleeping: US home sales drop, stocks fall; Norway raises rates

Thursday 29th October 2009

New US home sales unexpectedly fell last month, suggesting the looming end to the first-home buyer’s tax credit is sapping demand and holding back the economic recovery. Stocks on Wall Street fell and the greenback rose.

Sales fell 3.6% to an annual pace of 402,000 in September, according to the Commerce Department, surprising economists who had expected a gain.

The US$8,000 tax credit expires at the end of November and some contracts to buy new houses signed last month may not close in time. The Senate is considering an extension.

The median price fell to US$204,800 from US$225,200 a year earlier. Other figures showed orders for US durable goods rose in September, underlining a pickup in factory output.

Orders rose 1%, in line with expectations, following a 2.6% drop in August, according to the Commerce Department. Excluding transport-related items, orders rose 0.9%.

The Standard & Poor’s 500 Index fell 1.83% to 1043.85 and the Dow Jones Industrial Average declined 1.1% to 9774.93 in late trading. The Nasdaq Composite had fallen 2.56% to 2062.06 close to the end of the trading day in the US.

Home builders Lennar Corp. and DR Horton Inc. both sank more than 4%. Aluminium producer Alcoa Inc. fell 6.4% to US$11.99, leading the Dow lower. Caterpillar, the heavy earthmoving equipment maker, declined 3.38% to US$54.77 and General Electric fell 3.02% to US$14.48.

The US dollar and the yen strengthened against the euro as the new home sales data sapped demand for riskier, higher yielding, assets, and reports from world-leading German business solutions firm SAP, which reported soft forward orders, sinking 7.4% to 31.86 euros, with impacts on related global stocks including NEC and Intel Corporation.

The US dollar fell to US$1.4706 per euro from US$1.4804 and the yen fell 1.8% against the euro to 133.52, from 135.89. Japan’s currency fell to 90.76 per dollar from 91.80. The Dollar Index, which measure’s the greenback against a basket of six major currencies, rose 0.42% to 76.45.

Crude oil fell more than $2 a barrel as the dollar strengthened and after a US Energy Department report showed a gain in gasoline stockpiles and an increase in crude inventories.

Stockpiles of gasoline rose by 1.62 million barrels last week, according to the department. Crude oil for December delivery fell 2.6% to US$77.49 a barrel on the New York Mercantile Exchange.

Gold fell to the lowest level in three weeks as the dollar’s advance sapped demand for the precious metal as an alternative investment. Gold for December delivery slipped 0.4% to US$1,031.70 an ounce in New York.

Copper fell for a third straight day amid speculation weakening new home sales in the US may suggest demand for the metal will wane. Copper futures for December delivery fell 1.4% to US$2.9575 a pound on the New York Mercantile Exchange. Stocks in Europe tumbled after business software company SAP AG lowered its sales forecast, send the stock down 7.7%.

The Dow Jones Stoxx 600 Index fell 1.9% to 237.74, the biggest decline in about three weeks. Among national benchmarks, the UK’s FTSE 100 fell 2.3% to 5080.42, Germany’s DAX 30 declined 2.5% to 5496.27 and France’s CAC 40 slipped 2% to 3663.78.

ArcelorMittal dropped 4.9% after posting lower-than-expected earnings and chief financial officer Aditya Mittal said the steelmaker may be heading for a full-year loss. ThyssenKrupp, Germany’s biggest steelmaker, fell 6.1%.

BHP Billiton, the world’s biggest mining company, tumbled 6.1% as metals prices fell. Rio Tinto Group dropped 6.9%. BG Group, the UK’s third-largest gas producer, fell 3.1% after reporting a 44% decline in third-quarter profit.

Bank of Ireland slumped 25% and Allied Irish Banks dropped 12% on speculation the European Union may force reform on European lenders in exchange for government aid.

Norway’s Norges Bank raised its key interest rate a quarter point to 1.5%, becoming the first central bank in Europe to bolster borrowing costs since the financial crisis as inflation is expected to accelerate.

“Unemployment over the next few years will remain lower and wage growth somewhat higher than previously projected,” the central bank said. “This suggests higher inflation, indicating that the key policy rate should be raised somewhat more rapidly than previously projected.” It forecast the benchmark rate will average 4.25% in 2012.

Businesswire.co.nz

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