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Existing Home Sales Show Unexpected Drop But Remain At Elevated Levels


Existing home sales showed an unexpected decrease in the month of May, according to a report released by the National Association of Realtors on Tuesday, with higher sales in the West and the South more than offset by a notable drop in sales in the Northeast.

The report showed that existing home sales fell 2.2 percent to an annual rate of 5.66 million units in May from an upwardly revised 5.79 million unit rate in April. Economists had expected sales to rise to a 6.10 million unit rate from the 5.77 million unit rate originally reported for the previous month.

While existing home sales fell on a monthly basis, NAR said that sales remain at elevated levels amid buyer response to the tax credit, characterized by stabilizing home prices and historically low mortgage interest rates.

NAR noted that existing home sales in May are still up 19.2 compared to the 4.75 million unit rate reported for the same month a year ago.

Lawrence Yun, NAR chief economist, said, "We are witnessing the ongoing effects of the home buyer tax credit, which we'll also see in June real estate closings."

"However, approximately 180,000 home buyers who signed a contract in good faith to receive the tax credit may not be able to finalize by the end of June due to delays in the mortgage process, particularly for short sales." he added.

Yun noted that many potential sales are also being delayed by an interruption in the National Flood Insurance Program, particularly in Florida and Louisiana

Subsequently, NAR said its supports Senate amendments to extend the home buyer tax credit closing deadline through September 30 and to renew the flood insurance program.

As mentioned above, the unexpected drop in existing home sales was largely due to a 18.3 percent drop in sales in the Northeast.

Existing home sales in the West and the South increased by 4.9 percent and 0.5 percent, respectively, while sales in the Midwest were unchanged.

The report also showed that the national median existing-home price was $179,600 in May, up 2.7 percent compared to the same month last year. Distressed homes slipped to 31 percent of sales in May compared with 33 percent in April, NAR added.

NAR President Vicki Cox Golder said, "With distressed sales at roughly the same level as a year ago, the gain in home prices is a hopeful sign that the market is in a good position to stand on its own without further government stimulus."

"Very affordable mortgage interest rates and stabilizing home prices are encouraging home buyers who were on the sidelines during most of the boom and bust cycle," she added.

Additionally, NAR said that total housing inventories fell 3.4 percent to 3.89 million existing homes available for sale at the end of May. This represents 8.3 months of supply at the current sales pace, compared with 8.4 months of supply in April.


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The leading economic index for the euro area declined in May for the first time in more than a year, the Conference Board said Monday.

The index fell 0.5% in May to 109.7, following a 0.8% increase in April. At the same time, the Conference Board Coincident Economic Index, a measure of current economic activity, increased 0.1% in May after falling 0.2% in April. This was the sixth increase for the last seven months, the group said.

Negative contributions to the leading index, that came from stock prices, Markit manufacturing purchasing managers index and the economic sentiment index, were high enough to offset the continued large positive contribution from yield spread, the think tank pointed out. "The first fall of the LEI for the Euro Area in fourteen months suggests that the rebound in economic growth may have peaked during the second quarter, said Jean-Claude Manini, senior economist at the the Conference Board.

"However, it is too soon to say that the recent improvement in the economy will subside strongly in the near term," Manini said. "Employment may suffer from a wait-and-see attitude during the second half of 2010, but the effects of deficit reduction measures will be primarily felt in 2011."

The group noted that despite the decrease, the leading index for the Euro area is still 14.9% higher than its March trough. European sovereign debt crisis along with fiscal consolidation plans had weighed on Eurozone economic sentiment in May. The LEI aggregates eight economic indicators that measure activity in the Euroarea as a whole.


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The US dollar and the Japanese yen gained ground against their major opponents on Tuesday morning in Asia as a decline in most Asian stocks prompted traders to seek safe-haven currencies.
The yen and the dollar are viewed as safe haven currencies and they often rally when the stock markets slide and conversely lose ground when the stock market's appetite for risk is more robust.
Asian stock markets declined on renewed concerns over the global economic recovery. As of 9:50 pm ET, Japan's benchmark Nikkei 225 stock index dropped 1.46 percent, South Korea's Kospi declined 1.2 percent, Australia's S&P/ASX 200 was down 0.30 percent, New Zealand's NZSE-50 fell 0.39 percent and Taiwan's weighted average fell 0.16 percent.
The yen advanced to a 5-day high of 131.92 against the pound and 109.18 against the euro by 8:45 pm ET and the next likely resistance levels are seen at 131.20 and 109.10, respectively. The Japanese currency is currently quoted at 109.50 against the euro and 132.44 versus the pound.
The yen also climbed to a 5-day high of 72.76 against the Australian dollar, 81.92 against the Canadian dollar and 59.76 against the NZ dollar at this time and if the domestic unit strengthens further, likely resistance levels are seen at 71.90, 81.60 and 59.50, respectively. The yen is currently quoted at 59.9 against the kiwi, 82.20 versus the loonie and 73.14 against the aussie.
The Reserve Bank of Australia is set to conclude its monetary policy meeting today and then announce its decision on interest rates at 12:30 am ET. Analysts are expecting the bank to keep rates on hold at the current level of 4.50 percent.
The Japanese yen rose to a 4-day high of 87.43 against the US dollar and 82.03 against the Swiss franc around 8:45 pm ET. The yen is presently worth 87.55 against the greenback and 82.33 versus the Swiss franc with 87.0 and 81.80, respectively seen as the next likely target levels.
The greenback rose to a 5-day high of 1.2482 against the euro and 1.5084 against the pound before reversing its direction around 8:55 pm ET. If the greenback strengthens further, likely resistance levels are seen at 1.2240 against the euro and 1.4860 against the pound.
The US currency reversed its course after edging higher to 1.0669 against the Swiss franc at this time. The greenback-franc pair is presently quoted at 1.0640.
Looking ahead, Japan will provide preliminary May numbers for its leading and coincident indexes at 1:00 am ET. The leading index is expected to come in at 98.9, down from 101.7 in April. The coincident is forecast to show a score of 101.2, down barely from 101.3 in the previous month.
Switzerland is set to release its consumer price index for June at 3:15 am ET. The CPI is expected to rise 0.9% on year, while a 0.1 percent decline is expected on the month.
Canadian building permits for May and the US ISM non-manufacturing composite index for June are expected in the New York session.

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During early European deals on Wednesday, the Canadian dollar edged down against its US and Japanese counterparts despite a rise in oil price.

Meanwhile, the loonie pared some of its Asian session gains against the euro and the aussie.

Oil prices climbed today as traders look to weekly crude supply data for signs of recovering U.S. demand.

U.S. crude for August advanced as much as 40 cents to $72.38 a barrel on Wednesday and was up 15 cents at $72.13 at 1:38 am ET, after touching $71.09 on Tuesday, its lowest intra-day price since June 8, and peaking at $73.86. ICE Brent for August rose 16 cents to $71.61.

The American Petroleum Institute will publish weekly inventory data at 4:30 pm ET today, followed by government statistics from the Energy Information Administration (EIA) on Thursday at 11 am ET. Both reports come a day later than usual because of the independence day holiday on July 5.

Most Asian and European stocks plunged today as weak U.S. data renewed concerns about the strength of the global economic recovery

Activity in the U.S. service sector expanded for the sixth consecutive month in June, according to a report released yesterday by the Institute for Supply Management, although the pace of growth in the sector slowed by much more than economists had anticipated.

The ISM said its index of activity in the service sector fell to 53.8 in June from 55.4 in May, but a reading above 50 indicates continued growth in the sector. Economists had expected the index to show a much more modest decrease to a reading of 55.0.

In Asia, Japan's Nikkei 225 index fell 0.6%, Hong Kong's Hang Seng slipped 1.2%, South Korea's Kospi declined 0.55%, Taiwan's main index plunged 0.2%.

Australia's S&P 200 index and the All Ordinaries index slipped 0.5% each.

In Europe, Germany's DAX fell 0.6% in early deals, France's CAC 40 index plunged 1.2% and U.K.'s FTSE 10 index lost 0.9%.

The Canadian dollar slipped against the US currency in early European deals on Wednesday. At present, the loonie is worth 1.0580 against the greenback, compared to yesterday's close of 1.0544. The near term support for the Canadian dollar is seen around the 1.068 level.

During early European deals on Wednesday, the Canadian dollar declined against the Japanese yen. The loonie-yen pair is currently worth 82.43, down from yesterday's closing value of 83.02. If the loonie weakens further, it may likely target the 82.0 level.

During early European deals on Wednesday, the Canadian dollar pared the gains it made in Asian deals against the currencies of Europe and Australia. As of now, the loonie is worth 1.3304 per euro and 0.8962 against the aussie, compared to early highs of 1.3279 and 0.8942, respectively. The next downside target level for the loonie is seen at 0.901 against the aussie and 1.337 against the euro. The euro-loonie pair closed trading at 1.3310 and the aussie-loonie pair at 0.9006 on Tuesday.

Looking ahead, the Euro-zone final first quarter GDP and the German factory orders for May are expected in the upcoming hours.

Canada's Ivey PMI for June is slated for release at 10:00 am ET.

There are no significant economic reports scheduled for release from the U.S. today.


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U.S. Trade Balance Shows Biggest Deficit Since November 2008


Imports in the month of May rose at a slightly faster pace than exports, according to a report released by the Commerce Department on Tuesday, with the report subsequently showing an unexpected increase in the size of the U.S. trade deficit.

The Commerce Department said that the trade deficit widened to $42.3 billion in May from $40.3 billion in April. The wider trade deficit came as a surprise to economists, who had expected the trade deficit to narrow to $39.4 billion.

With the unexpected increase, the size of the trade deficit reached its highest level since coming in at $43.8 billion in November of 2008.

Peter Boockvar, equity strategist at Miller Tabak, said, "The higher than expected trade figure may cut Q2 GDP estimates by up to 0.3 of a percentage point."

"With the U.S. economy becoming less dependent on the U.S. consumer, we must make things the rest of the world wants and improving and growing our export sector is a vital component of the future economic health of our country," he added.

The wider deficit reflected a notable increase in the value of imports, which rose by 2.9 percent to $194.5 billion in May from $189.0 billion in April. The increase lifted the value of imports to the highest level since October of 2008.

Nonetheless, the jump in the value of imports was partly offset by a 2.4 percent increase in the value of exports, which rose to $152.3 billion in May from $148.7 billion in May. Exports rose to their highest level since September of 2008.

The report also showed that the goods deficit widened to $54.5 billion in May from $52.5 billion in April, while the services surplus was virtually unchanged at $12.2 billion.

Additionally, the Commerce Department said that the politically-sensitive trade deficit with China widened to $22.3 billion in May from $19.3 billion in April.


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The dollar continued to decline Thursday morning as improving growth prospects in Asia and Europe made counterparts in those regions more attractive.
At the same time, a recent string of troubling economic data from the US has fueled concerns that the domestic recovery is petering out.
Yesterday's disappointing retail sales report confirmed that consumers are anxious amid lingering problems in the labor and housing markets.
JP Morgan Chase has joined the growing line of companies to have reported better than expected earnings results this week, propping up stock futures and generating risk appetite.
Higher-yielding currencies like the euro tend to benefit from increased capacity for risk.
The dollar dropped to a fresh 2-month low versus the euro, extending its big July losses. The buck slipped to 1.2825, moving a full ten cents from June's 4-year high of 1.1805.
The eurozone economy is likely to grow at a "moderate and uneven" pace while inflationary pressures in the 16-nation bloc remain contained, the European Central Bank says.
In its latest monthly bulletin, the ECB said the risks to the euro area's economic outlook are "broadly balanced, in an environment of high uncertainty."
There was no relief for the dollar against the sterling. The buck fell to 1.5363, its lowest since late April.
Against the yen, the dollar pulled back to 87.84. Late in June, the dollar hit a 2010 low of 86.95.
The Bank of Japan has sharply revised up its fiscal 2010 growth forecast for the country's economy, citing the acceleration of growth in emerging economies.
A plethora of key economic data will keep traders on their toes throughout Thursday's session.
At 8:30 am ET, the Labor Department will release its weekly jobless claims report, with economists forecasting a modest drop in claims to 450,000 in the recent reporting week from the 454,000 for the previous week.
The Labor Department is also due to release its producer price index for June at 8:30 am ET. The recent dip in oil prices is expected to act as a drag on the headline number, with economists expecting a 0.1% drop in the producer price index. At the same time, the core producer price index is likely to show 0.1% growth.

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The International Monetary Fund on Tuesday said it reached in an agreement with Afghanistan on a new three-year economic program that could be supported by US$125 million financial aid.

"The main goals of the program are to move Afghanistan towards financial sustainability, ensure that the money spent is well used, and build capacity for policy implementation," said Masood Ahmed, IMF Director of the Middle East and Central Asia Department said. The program will complement the broader development agenda that bilateral and multilateral partners will be supporting and will include a package of technical assistance from the IMF, he added.

Enrique Gelbard, IMF mission chief for Afghanistan said despite serious constraints, Afghanistan has been making progress under its economic program. Growth has been strong, inflation has been controlled, and tax collection has grown significantly since 2009.

He noted that Afghanistan government is committed to consolidating these achievements under its new program, which contains policies to keep inflation low, strengthen banking supervision and regulation, achieve sustained increases in fiscal revenues, ensure transparency in the mining sector, and improve efficiency in the budget process and public spending while protecting the poor.

The agreement reached with the Afghanistan authorities is subject to approval by IMF management and the Executive Board. Consideration of the program by the Executive Board is expected in late August.

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The People's Bank of China and the Monetary Authority of Singapore on Friday agreed to a bilateral currency swap arrangement.

The swap arrangement will provide Chinese Yuan liquidity of up to CNY 150 billion and Singapore dollar liquidity of up to S$30 billion. The agreement has a maturity of three years and can be extended by agreement between the two sides.
The agreement intended to promote trade and direct investment for economic development between two nations, was announced at the 7th Joint Council for Bilateral Cooperation Meeting held in Beijing. "The bilateral currency swap arrangement is a key pillar of co-operation between the PBoC and the MAS to strengthen regional economic resilience and financial stability," MAS said in a statement.

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Tuesday during early European deals, the yen plummeted to fresh multi-week lows against the currencies of Australia, New Zealand and Europe as a rise in European stocks reduced demand for the safe-haven Japanese currency.

Meanwhile, the yen plunged to a 12-day low against the Canadian dollar.

European stocks soared in early deals on strong results from UBS and Deutsche Bank. Germany's DAX rose 0.3% in early deals, France's CAC 40 index climbed 0.75% and U.K.'s FTSE 10 index gained 0.6%.

However, Tokyo stocks ended almost flat today as the market awaited a series of earnings reports from Japanese companies this week.

After drifting in and out of negative territory, the 225-issue Nikkei Stock Average finished 6.81 points, or 0.07 percent, lower from Monday at 9,496.85.

Swiss banking giant UBS AG reversed to a profit in its second quarter, helped by excellent performance of its Investment Bank business. The segment also benefited by a gain on its own debt. At the same time, the company noted that withdrawals from its wealth management business slowed.

UBS said that it made a profit of CHF 2.005 billion or US$1.911 billion compared to a loss of CHF 1.402 billion in the year-ago period, although it trailed the previous quarter's profit of CHF 2.202 billion.

German financial services firm Deutsche Bank reported a higher profit for the second quarter, helped by a sharp decline in provision for credit losses and strong revenue growth in its Global Transaction Banking and Asset Management businesses.

Net income attributable to Deutsche Bank shareholders was EUR 1.16 billion, or about US$1.51 billion, compared with EUR 1.09 billion in the prior-year quarter. Earnings per share were EUR 1.75 versus EUR 1.64 a year earlier.

An encouraging German GfK consumer confidence report released today also lifted investors sentiment.

German consumer climate is set to improve in August, as employment prospects brightened, results of a key survey showed. The consumer confidence index logged 3.9 for August, up from a revised 3.6 in July, a monthly survey from GfK Group showed. That was in contrast to an expected fall to 3.5.

The yen declined against the Australian dollar during early European session on Tuesday. As of now, the yen is trading near a 5-week low of 79.11 against the aussie, compared to 78.46 hit late New York Monday. On the downside, 80.9 is seen as the next target level for the Japanese currency.

During early European deals on Tuesday, the yen slipped against the New Zealand dollar. The kiwi-yen pair that closed yesterday's trading at 63.79 is now worth 64.25. This set the lowest level for the yen since June 23. If the yen weakens further, it may likely target the 65.4 level.

The yen plunged against the Canadian dollar in early European deals on Tuesday. As of now, the yen is trading at a 12-day low of 84.96 against the loonie and the next downside target level for the yen is seen at 86.5. At yesterday's close, the loonie-yen pair was quoted at 84.22.

At 4:35 am ET Tuesday, the yen slumped to near an 8-week low of 113.73 against the euro. At present, the yen is worth 113.65 against the euro with 114.2 seen as the next downside target level. The euro-yen pair closed yesterday's trading at 112.90.

The yen declined against the currencies of US and UK during early European deals on Tuesday. Currently, the yen is worth 135.20 against the pound and 87.40 against the dollar, compared to yesterday's close of 134.59 and 86.88, respectively. If the yen drops further, it may likely target 87.7 against the dollar and 135.6 against the pound.

Looking ahead, the U.S. consumer confidence for July and the S&P/Case-Shiller home price index for May have been slated for release in the New York morning.


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U.K.'s sterling surged up to 1.5619 against the US dollar by 1:35 am ET Wednesday, its highest level since February 18 and a further rally may push the pair to stay around the 1.5820 resistance level. The cable is presently quoted at 1.5614.
The pound also edged slightly higher to 137.21 against the yen and challenged yesterday's new multi-week high of 1.6552 against the Swiss franc at this time. The pound is presently quoted at 1.6549 against the alpine unit and 137.12 against the Japanese currency.

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