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While you were sleeping: US housing recovers

Wednesday 22nd October 2014

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Wall Street advanced, up more than 1 percent, amid better-than-expected data on existing US home sales, and solid corporate earnings including from Apple.

In afternoon trading in New York, the Dow Jones Industrial Average rose 1.13 percent, the Standard & Poor’s 500 Index climbed 1.61 percent, while the Nasdaq Composite Index advanced 1.90 percent. 

Gains in shares of Chevron and those of 3M, last up 2.5 percent and 2.3 percent respectively, led the Dow higher. 

Shares of Apple gained, last up 2.5 percent, after the company reported quarterly revenue that surpassed expectations on buoyant iPhone sales and offered a solid outlook for the next quarter.

The latest US economic data also offered reason for optimism. Existing home sales climbed a better-than-expected 2.4 percent to an annual rate of 5.17 million units in September, the highest level in a year. 

“Low interest rates and price gains holding steady led to September’s healthy increase, even with investor activity remaining on par with last month’s marked decline,” Lawrence Yun, NAR chief economist, said in a statement.

Even so, the recovery in the industry is lacking steam.

"The housing recovery continues to move along sluggishly, as consumers are stuck between tight credit standards and limited wage growth," Sophia Kearney-Lederman, an economist at FTN Financial in New York, told Reuters.

Separately, the Philadelphia Federal Reserve Bank’s gauge of non-manufacturing activity in the mid-Atlantic region increased to 44.1 this month, down from 35.7 in September.

Meanwhile, US Treasuries fell, pushing the 10-year yield two basis points higher to 2.22 percent.

“There’s a tug-of-war going on,” Sean Simko, who oversees US$8 billion at SEI Investments in Oaks, Pennsylvania, told Bloomberg News. “You have stronger domestic growth versus softer global growth.”

Indeed, gold futures rose as investors bet the Fed might not raise interest rates as soon as expected. The Federal Open Market Committee’s next two-day meeting starts October 28.

“There is a growing consensus among investors that the Fed will continue with the low-interest rate policy,” Phil Streible, a senior commodity broker at RJ O’Brien & Associates in Chicago, told Bloomberg News. “Also, physical demand is expected to support prices.”

In Europe, the Stoxx 600 finished the session with a 2.1 percent jump from the previous close. 

The UK’s FTSE 100 Index added 1.7 percent, Germany’s DAX gained 1.9 percent, while France’s CAC 40 rallied 2.3 percent.

The European Central Bank reportedly bought Italian covered bonds under its asset purchase program, following Monday’s reported purchase of French notes from Societe Generale and BNP Paribas as well as Spanish securities from other lenders.

“The ECB was slow to start and it’s still not US-style QE, but they’re doing the best to talk up the market,” Justin Haque, an equity sales trader at Hobart Capital Markets in London, told Bloomberg News, referring to quantitative easing.


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