While you were sleeping: US housing starts rise, oil up

Wednesday 18th March 2009

US housing starts rose last month, halting the longest slide in 18 years, raising optimism the property slump may be showing signs of reviving.

Housing starts jumped 22% to an annual rate of 583,000 homes in February, according to the US Commerce Department. The increase was driven by condominiums, apartments and townhouses, the figures showed.

Crude oil rose to a two-month high after the report and stocks on Wall Street rallied, with gains by companies exposed to the property market including home renovation chain Home Depot, up 6% to US$21.34, and construction firm Centex Corp., up 6.7% to US$7.37.

That helped make up for a slide in raw materials companies after Alcoa said it would cut its dividends and cut costs to preserve cash. Alcoa dropped 10% to US$5.48, the biggest decline on the Dow Jones Industrial Average.

The Dow climbed 2.5% to 2395.7 and the Standard & Poor's 500 Index rose 3.2% to 778.12. The Nasdaq Composite climbed 4% to 1462.11 as Cisco Systems rose 3.3% to US$15.96 after Goldman Sachs rated the computer networking systems maker a "conviction buy."

Producer prices in the US rose a less-than-expected 0.1% in February, seasonally adjusted, reflecting a more tepid increase in energy prices, according to Labor Department figures, a sign that inflation is subdued as the world's largest economy remains mired in recession.

Crude oil rose on speculation fuel demand will strengthen in the US following a revival in the property market.

Crude oil for April delivery rose 3.6% to US$49.06 a barrel on the New York Mercantile Exchange, bringing the advance this year to 10%.

Copper fell on concern China is importing more of the metal than it needs, which may lead to a build up in stockpiles. Copper futures for May delivery fell 1.3% to US$1.724 a pound on the New York Mercantile Exchange.

Gold fell on prospects for a revival in economic growth, curbing demand for the precious metal as a haven from economic turmoil.

Gold futures for April delivery edged down 0.6% to US$916.80 in New York.

Executives and directors of the failed Lehman Brothers were sued by the state of New Jersey, which alleged US$118 million was lost on investments for the state's pension funds because of misrepresentations by the firm.

Former chief executive Richard Fuld is among those named in the suit, filed in state Superior Court in Trenton today.

"We intend to hold Lehman executives and directors accountable for the fraud and misrepresentation that caused more than $100 million in losses to New Jersey's pension funds," Governor Jon Corzine said in a statement.

Bloomberg reported that American International Group has allocated US$57 million for so-called retention pay for employees it plans to dismiss. The insurer, the recipient of some US$85 billion of federal loans that kept its from collapse, is under fire for plans to hand some US$1 billion to employees under a bonus scheme meant to prevent them from leaving. President Barack Obama is among those that have scolded AIG.

In Europe, Nokia Oyj, the world's largest mobile phone manufacturer, announced plans to slash 1,700 sales and marketing jobs in response to the global downturn in demand. Phone sales fell 15% in the fourth quarter and Nokia is predicting a decline of 10% industry-wide this year. Shares of Nokia fell 3.1%.

The Dow Jones Stoxx 600 Index fell 0.7% to 172.05 led by a 15% slide in Zodiac SA after the region's biggest manufacturer of aircraft seats said earning swill miss its target.

Royal Dutch Shell Plc fell 1.3% on concern about a slowing pipeline of new reserves. ArcelorMittal fell 12% and Bayer fell 10%.

In London, the FTSE 100 fell 0.2% to 3857.1, paced by a 2.8% drop in BHP Billiton and a 5.7% decline in Rio Tinto.

Germany's DAX fell 1.4 percent to 3987.77 even after a survey showed German investor confidence rose to a two-year high this month, reflecting lower European Central Bank interest rates.

Confidence improved to -3.5 from -5.8 last month, according to the ZEW Center for European Economic Research.
France's CAC 40 fell 0.9% to 2767.28.

The yen weakened against the euro and the US dollar as rising stocks and gains in US housing starts spurred Japanese investors to seek higher yielding, or riskier assets denominated in other currencies.

The yen fell to 128.26 against the euro from 127.32 and declined to 98.58 per dollar from 98.18. The dollar slid to $1.3011 per euro from $1.2968.

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