Support
US home sales beat forecasts, Fed tone moves markets
New home sales in the US surprised to the upside, reaching a three-year high. The print may reflect the recent decline in long-term reference rates, although many analysts regard it as a one-off outlier that is likely to normalise in coming months. Meanwhile, equity markets closed lower amid the Fed’s cautious tone and heightened uncertainty.
US housing data surprised to the upside, with a 20.5% month-on-month increase.
US stock indices fell in parallel after comments by Jerome Powell implying economic uncertainty and elevated valuations.
The Dollar Index regained ground as the Fed’s hawkish undertone persisted; markets now look to Friday’s PCE release.
Brent and WTI settled higher after an unexpected draw in US crude inventories and reports of Ukrainian strikes on Russian extraction facilities.
US home sales surprise to the upside
The US Census Bureau reported that sales of new homes rose by 20.5% month on month, beating analysts’ forecasts. The result may indicate a budding recovery in consumer confidence after months of uncertainty linked to US trade policy. Even so, several real-estate specialists characterise the jump as atypical and expect a subsequent reversion towards more normal levels.
New-home sales account for roughly 10% of the overall US housing market. Today’s reading marks a three-year high and may be associated with lower mortgage reference rates, which are at their lowest in the past 12 months. Thirty-year mortgage rates are currently around 6.26% (Federal Reserve Bank of St. Louis). That said, the series—especially for new single-family homes—is volatile; sustained evidence over coming months would be required before assigning greater macroeconomic significance to the signal.
US indices fall on Powell’s tone
The main US indices recorded a second straight decline following cautious remarks from Fed Chair Jerome Powell. He reiterated that FOMC members will proceed “meeting by meeting”, avoiding pre-emptive moves. While acknowledging a cooling labour market, he also highlighted the risk of an inflation rebound.
Powell further noted that, although the Fed does not currently see financial-stability risks, “prices are at elevated levels” across risk assets such as equities. In essence, policymakers will await additional data to underpin future decisions, given several unresolved sources of uncertainty. Attention now turns to Friday’s PCE inflation data.
US equities finished lower across the board: the S&P 500 −0.28%, the Dow Jones −0.37%, and the Nasdaq 100 −0.31%. In Europe, performance was mixed, with the CAC 40 −0.57%, while the DAX and IBEX 35 rose 0.23% and 0.24%, respectively.
Dollar higher on Fed cautious tone
The Dollar Index recovered by about 0.66% after Powell declined to commit to an aggressive pace of cuts in yesterday’s press conference. The euro fell 0.63% against the dollar, while the pound dropped 0.55%, the yen 0.82%, and the Swiss franc around 0.50%. Despite last week’s 25 bps reduction in the policy rate, Powell’s remarks left a residual restrictive bias in place, helping the DXY hold technical support near 97.50.
Crude oil inventories boost prices
US Energy Information Administration crude-oil inventories registered another draw, contrary to expectations. Consensus looked for a +0.8 million-barrel build, but a −0.607 million-barrel decline was reported, suggesting demand remains firm. Brent and WTI futures advanced by 1.23% and 2.49%, respectively.
Additional support likely came from reports of Ukrainian attacks on oil extraction sites in Russia’s Volgograd region. Geopolitical risk premia also widened after comments by US President Donald Trump indicating that Ukraine could recover Russian-occupied territories, reducing the likelihood that existing sanctions on Russia will be lifted.
