Housing News Boosts Dollar But Not Yuan
The US dollar has made gains against many of its commonly-traded peers this morning, helped by data showing the pace of construction on new housing units is not just buoyant but close to its highest in eight years.
By Peter Martin
Tuesday, August 18, 2015 - 00:00
The Commerce Department revealed this morning that US housing starts rose 0.2% in July to a seasonally-adjusted, annualized rate of 1.206 million, the fastest pace seen since October 2007, while June’s rate was upwardly revised to 1.204 million from an originally-reported level of 1.174 million. EUR/USD fell 0.35% to 1.1040, while USD/CAD rose 0.10% to 1.3093.
The positives in this report were mitigated slightly by weakness in building permits, though some of the decline there was explained by amendments to real estate law in New York City that skewed permits away from July and into June. Building permits were down a sizeable 16% in July to an annualized rate of 1.119 million, while June was revised up from 1.343 million to 1.337 million. Even taking into the skewing, there is clearly a sharp overall decline in permits, with a 9.9% drop in the West, and this points to a loss of momentum ahead for housing starts.
Despite some positive Chinese house price data — showing a third consecutive rise in home prices in July — fears that the yuan could continue to depreciate contributed to a sharp fall in Chinese stock markets overnight. The Shanghai Composite Index finished down just over 6%, while the Hang Seng lost more than 1%.
Consequently, stocks on Wall Street opened at slightly depressed levels, sentiment having been dragged down by the weakness of the overnight trading session in Asia, and shortly after the opening bell the Dow Jones was off by 49 points or 0.28% at 17,496, while the S&P 500 Index slipped 0.19% to 2098.4.
Two Dow components reported this morning: Wal-Mart ($WMT) and Home Depot ($HD). Home Depot rose more than 2% after beating estimates for same-store sales, but this was outweighed by Wal-Mart’s poor performance. The retail giant not only missed the Wall Street consensus estimate for its quarterly earnings, but also cut its full-year guidance, leading to a 3% fall in its share price.
Despite the stock market declines in China, there has been a bounce in the price of US oil futures today, moving away from the $40 level, though prices still remain close to multi-year lows. US light crude oil futures rose 1.7% to $42.60 a barrel, though Brent crude declined 0.4%. The US Energy Department releases weekly crude oil inventory data on Wednesday morning.
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