While you were sleeping: US housing shows strength

Thursday 20th September 2012

Better-than-expected housing data bolstered Wall Street, while the Bank of Japan's decision to follow policy makers in the US and Europe by providing further stimulus for its languishing economy helped underpin the mood.

Existing houses sales climbed 7.8 percent to a 4.82 million annual rate in August, according to the National Association of Realtors. Meanwhile, construction of single-family houses rose 5.5 percent to a 535,000 rate, the Commerce Department said.

Both data represent the strongest showings in a little over two years.

"The nascent housing recovery has deepened," Ellen Zentner, a senior US economist at Nomura Securities International in New York, told Bloomberg News. "Ultimately, this improvement will lead to a rise in residential wealth, which tends to lift consumer confidence and spending."

To be sure, the overall number was more subdued as housing starts rose 2.3 percent to a 750,000 annual rate in August.

Still, Wall Street took the data as welcome signs of recovery in the American real estate market. In late afternoon trading in New York, the Dow Jones Industrial Average gained 0.29 percent, the Standard & Poor's 500 advanced 0.33 percent, while the Nasdaq Composite Index rose 0.27 percent.

Shares in Apple edged still higher after its new iPhone 5 won rave reviews from tech bloggers and others who were given the faster, slimmer and lighter smartphone ahead of its release to customers later this week.

In Europe, the Stoxx 600 Index ended the day 0.4 percent stronger from the previous close. National benchmark indexes in Germany, France and the UK also rose, with the DAX gaining 0.6 percent, the CAC 40 rising 0.5 percent and the FTSE 100 advancing 0.4 percent.

The appeal of Spanish debt has steadily increased. Analysts including Citigroup's Nishay Patel in London and Aman Bansal in Mumbai expect the country's auction of up to 4.5 billion euros of debt due in October 2015 and January 2022 tomorrow will draw solid demand.

"Recent policy announcements have created an environment conducive for peripheral bond auctions to go well, at least in the near term," Patel and Bansal wrote today in a note to clients, according to Bloomberg.

Meanwhile, investors also drew heart from the Bank of Japan's plans to boost its asset-purchase target by 10 trillion yen (US$128 billion) in an effort to turn around the nation's economic slump.

In commodity markets, oil extended its slide into a third day after Saudi Arabia said it was going to free up supplies to keep prices in check and after a report showed that weekly US crude inventories unexpectedly jumped last week.

BusinessDesk.co.nz

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