US New Home Prices Highest Since 2008

Daily Analysis - 27/07/2016

Housing Sector Receives Another Positive Boost From Rising New Home Sales

Although there have been concerns that the housing sector may be reaching a new peak, the latest data from the Census Bureau indicates that the sector is still showing promise after reporting the highest number of new home sales since 2008, just before the last cycle turned. While greeted with optimism, data on prices in 20 major US cities is raising concerns about the pace of housing appreciation.

New Home Sales Skyrocket

According to the latest available data from the US Census Bureau, new home sales climbed 25.4% year over year in June, alleviating fears that the housing sector was imminently headed for another downturn following concerns about the pace of housing starts and existing home sales. On an annualized basis, new homes sales rose to 592,000, surging past expectations of 560,000. More optimistic in all the data released yesterday was the median sales price which climbed back above $300,000 to $306,700, marking the highest levels since April. However, there was some disappointment following the S&P Case-Shiller home price index report which showed the pace of price appreciation across the US slowing to 5.20% from 5.40% recorded during the prior period. US equity benchmarks ended the day mixed, with the Nasdaq Composite leading the gains after climbing 0.24% during the cash equity session.

Deflationary Headwinds Hit Australia

Speculation of another interest rate cut during the second half of the year continues to rise as Australia after June’s inflation figures fell to the lowest in 17-years, further complicating the outlook for policymakers as they work to reverse the disinflationary slide. The consumer prices slipped to 1.00% on an annualized basis from 1.30% during the prior period, printing well below the 2.00-3.00% targeted, in a sign that Central Bank officials will be forced to slash another 25 basis from the key rate before the year is out. Although the Reserve Bank of Australia has continued to warn about the possibility amid an Australian dollar they perceive as overvalued, the latest consumer price reading is a strong indication that policy may be adjusted sooner rather than later. The Australian dollar has fallen steeply since the report, with AUDUSD retreating below 0.7500 to as low as 0.7458 before rebounding.

Oil Plunges on Cushing Build

WTI crude oil fell to the lowest levels since April after reports from the American Petroleum Institute showed another large stockpile build in Cushing storage facilities that beat estimates by a wide margin. Although the one silver lining to the latest data was the significant drawdown in gasoline inventories which fell by 420,000 barrels last week according their figures, the 1.400 million barrel build in Cushing is raising concerns about the pace with which inventories are filling. This anxiety translated to another steep session of losses in WTI and Brent crude oil prices, with both instruments extending losses during the Asian overnight session. Although API is a precursor to today’s Energy Information Administration report on the state of crude oil inventories, confirmation of API’s reading on Cushing could be enough to catalyze another selloff in prices later. WTI futures for September delivery are currently trading below $43.00 per barrel.

Apple Beats Earnings But Forecasts Revenue Decline

In spite of beating the consensus of analyst expectations during its latest earnings announcement, Apple’s latest forward looking guidance came in weaker than expected after the company forecast another quarter of downbeat revenues in the coming periods as Chinese sales plunge. Should their projections be matched, it would represent the third straight period of falling revenues. Earnings per share for the third quarter came in at $1.42 versus expectations of $1.39, however, sales during the period slumped by -15.00%, adding to concerns that the best performance may be behind the company. With iPhones accounting for the lion’s share of the company’s earnings, a slowdown in key markets like China could foreshadow a significant downshift in forward looking expectations unless the company is able to revive is commanding share of the smartphone market. Shares fell during the session, before climbing by 6.37% during the after-hours session after the results were reported.