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While you were sleeping: US economy back on track

Friday 24th September 2010

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Shares on Wall Street were mixed, reflecting continued contrasting comments and signals on the pace of the US economic recovery.

While applications for American unemployment benefits unexpectedly rose last week, investors appeared to draw some comfort from data showing sales of US previously owned homes rose from a record low in August.

“We came off the tracks a little bit and we are slowly finding our way back," Aaron Smith, a senior economist at Moody's in West Chester, Pennsylvania, told Reuters.

Purchases of existing houses climbed to a 4.13 million annual pace, the National Association of Realtors said today in Washington. Initial jobless claims rose 12,000 to 465,000 in the week ended Sept. 18, according to the Labor Department.

Also today, the New York-based Conference Board said its index of leading economic indicators rose 0.3%, exceeding forecasts.

Even so, billionaire investor Warren Buffett said the US economy remained in recession. On Monday, the National Bureau of Economic Research said the world's largest economy ended an 18-month recession in June 2009, but cautioned that its assessment did not mean normal activity had resumed.

"We're still in a recession," Buffett told CNBC television in an interview broadcast on Thursday.

"We're not gonna be out of it for a while, but we will get out."

Buffett said that in his view a recession ended when real per capita gross domestic product returned to its pre-downturn level.

In late trading, the Dow Jones Industrial Average and the S&P 500 had barely budged, slipping 0.04% and 0.06% respectively. The Nasdaq Composite Index rose 0.47%, propelled by stocks such as Apple.

Apple rose to a record after Piper Jaffray analyst Gene Munster boosted his forecast for 2011 iPad sales to 21 million from 14.5 million units.

The benchmark Stoxx Europe 600 Index slid 0.1% to 261.07. National benchmark indexes fell in all 18 western European markets except Norway amid signs the recovery in Europe was halting.

Ireland's economy shrank 1.2% in the second quarter, crushing forecasts for growth and raising the stakes for Prime Minister Brian Cowen as he seeks to reassure investors the country is not on the verge of financial meltdown.

Irish five-year credit default swaps hit a record high of 500 basis points, up 40 bps on the day, Reuters reported.

In other European economic news, a composite index based on a survey of euro-area purchasing managers in services and manufacturing industries fell to 53.8 in September from 56.2 in August, London-based Markit Economics said today.

Gold held near record highs. Spot gold was bid at US$1,290.10 an ounce at 1412 GMT against US$1,289.60 late in New York on Wednesday.

Silver rose to a 2-1/2 year high at US$21.21 an ounce, coming within a few cents of its highest since 1980, up from US$21.11 yesterday.

On the currency front, President Barack Obama said in a meeting on Thursday with Chinese Premier Wen Jiabao that China needed to do more to resolve a dispute over the value of the Chinese currency.

Obama told Wen in their talks on the sidelines of the UN General Assembly in New York that the currency was the "most important issue" of their meeting, Bloomberg reported.

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