Scoreboard: Gimme shelter

A surprise surge in US new home sales boosted the US dollar but failed to move Wall Street.

A surge in US home sales (new and for January) took markets by surprise last night, especially considering how other data releases have been hit so hard by bad weather. New home sales were expected to fall about 3 per cent or so, after a 3.8 per cent fall the month prior. Instead they spiked 9.6 per cent to their highest level since July 2008. That was pretty much the key data overnight. News flow was otherwise concerned with Russia – sending troops to do drills near the Ukrainian border – and the recent fall in the yuan.

Forex markets saw the most vigorous response to the US housing data with the greenback stronger against the majors following that housing report. The Australian dollar fell about 45 pips to 0.8956, the euro was off over 70 pips to 1.3678 while the British pound fell 25 pips (1.6656).

On Wall Street, equities didn’t really react to the stronger-than-expected data at all. It’s not that stocks were having a bad session though, and indeed up until the last couple of hours of trading the S&P500 was trading in the black. The offer came on just before 0600 AEST and major indices were just in the red with about an hour left to trade. The S&P500 is down 0.1 per cent (1844), the Dow is flat (16,178) and the Nasdaq is down 0.1 per cent (4285). Over in Europe, equities had bigger falls – the Dax and the CaC fell 0.4 per cent, while the FTSE100 was 0.5 per cent lower.

Commodities saw big moves in the precious metals space, to the downside. Silver had slumped 3.3 per cent at the time of writing, and gold was down $14 to $1328. Fair to say copper didn’t have a great session either and was off 1 per cent. Crude however was mixed – WTI actually rose 0.7 per cent ($102.5), while Brent was flat ($109.6).

Rates generally saw decent buying action. On the US Treasury front the 10-year yield was down about 5 bps to 2.669 per cent, the 5-year yield is at 1.48 per cent and the 2-year at 0.33 per cent. Aussie futures were up 3 ticks on the tens (95.965) and the threes (at 97.060).

Elsewhere the breakdown of UK GDP showed fairly broad-based growth, with spending across most of the major categories lifting for the quarter. Business investment was particularly strong in the quarter. Over in Germany, consumer confidence rose – if only slightly – to 8.5 from 8.3, according to GfK. Otherwise the recent decline in the yuan has been placed squarely at the feet of the People’s Bank of China. Well, according to the press. It’s being reported that the central bank wants to weaken the yuan – which it did, to a seven-month low – in preparation for widening of the currency’s trading band.

In markets today, the SPI suggests our stocks will be down a little – maybe 0.1 per cent. Data wise, domestic capex data is out at 1130 AEDT, with the consensus looking for a 1.3 per cent fall in the December quarter, following a 3.6 per cent rise last quarter. Tonight we see German employment and inflation figures, and the eurozone business climate indicator. Over in the US, durable goods are released, alongside initial jobless claims. Finally, we can look forward to a number of Fed speakers. Top of the list of course is Fed Chair Janet Yellen and her thoughts on monetary policy to the US Senate. Next up we get Dallas Fed President Richard Fisher and his views on financial stability. Finally, Atlanta Fed President Dennis Lockhart speaks about the outlook for banking.

Have a great day…

Adam Carr is a leading market economist.

Follow @AdamCarrEcon on Twitter.