World Indexes Fall on Weak U.S. Home Sales

Bikram Pandey
24 Aug, 2010
New York City

U.S. stocks declined sharply after the existing home sales declined at twice the pace in July. The rising inventory of unsold homes and the lowest rate of home sales in a decade unnerved investors. Three leading indexes dropped 1% or more.

[R]4:00 PM New York – U.S. stocks declined sharply after the existing home sales declined 26%, twice the pace estimated. The rising inventory of unsold homes and the lowest rate of home sales in a decade unnerved investors. Three leading indexes dropped 1% or more. Indexes in Europe fell more than 1%.[/R]

U.S. stocks declined after existing home sales plunged to annual rate of 3.83 million, 25.5% decline in July from a year ago. The decline in July was 27.2% from June. Inventory of unsold homes surged to 12.5 months, twice the average of six months.

The decline in the month was more than twice than expected as inventory of unsold home swelled and the annual rate of home sales declined to 3.83 million units, lower in a decade.

The sale of existing homes plunged after the expiry of one-time tax credit of $8,000.

Home builders and banks led decliners. U.S. stocks declined amidst concerns of economic recovery. AIG repaid $3.95 billion in loans to the Federal Reserve Bank of New York.

Big Lots, Inc second quarter sales increased 5.1% and net rose 37%. Bank of Montreal third quarter revenues were flat and net rose 17%. Daktronics, Inc sales declined 11% but net rose 71%. Trina Solar second quarter net doubled.

Education providers, Strayer Education, ITT Educational and Apollo Group Inc traded higher after the U.S. Department of Education said it will conduct review of the graduation data.

The European indexes traded lower amidst concerns over the pace of global economic recovery. Euro-zone industrial order growth slackened in June. Germany GDP expanded 2.2% in the second quarter to June and budget deficit rose in the first half.

The UK indexes fell on the momentum of global economic recovery. The UK mortgage approvals dropped in July. Xstrata agreed to acquire Sphere Minerals for $383 million. India rejected permission for a bauxite mining project by Vedanta.

Antofagasta Plc first half revenues surged 49% and net increased 91.4%. Punch Tavern plc said indicated annual earnings are likely to exceed its previous estimate. Wood Group (John) Plc said net profit declined 24%.

The benchmark index in Japan dropped and fell more 20% from its peak in April as the government struggles to revive aggregate demand and stem the rise of yen. Panasonic plans to expand China capacity flat screen TV capacity five-fold. Demand for new 20-year government bond firms up.

Stocks in China rallied for the first time in three days while in Hong Kong fell. Shipbuilding orders soar in China while sales of new homes in Shanghai drops in the first seven months. China Construction Bank first half net soared 27%.

Stocks in Mumbai trade down most of the day. State Bank of India expects to earn $2 billion in profit in the current year, record for any bank in India. Cairn India discovers oil and gas in KG basin. India rejects Vedanta’s bauxite mining proposal in Orissa.

Stocks in Australia fell on continuing election uncertainty. Melbourne water supply eases. AWB shareholders back takeover by Agrium Inc. Mako shares debuts strongly. Macarthur Coal Ltd is looking to raise A$450 million and annual earnings declined 26%.

Commodities, Currencies and Yields

Dollar edged higher against euro to $1.268 and fell against the Japanese yen to 84.19.

Crude oil decreased $1.51 to $71.59 a barrel for a front month contract, natural gas edged lower 2 cents to $4.05 per mBtu and gasoline decreased 3.04 cents to 185.06 cents.

Gold decreased $1.51 in New York trading to close at $1,231.20 per ounce, silver increased $0.39 to $18.43 per ounce and copper for the front month delivery increased 5.80 cents to $3.25 per pound.

Yields on 10-year U.S. bonds decreased to 2.50% and on 30-year U.S. bonds yields decreased 3.56%.