Asian stocks moved towards their first advance in 5 days after a drop in U.S. new home sales fueled speculation the Fed Reserve may take fresh steps to stimulate growth, boosting demand for growth sensitive shares.
Hong Kong’s Hang Seng Index was up 0.05%, Australia’s S&P/ASX200 was up 0.41%, whilst Japan’s Nikkei 225 Index was up 0.50%. The greenback also enjoyed gains in Asian trading as investors brushed off increasing speculation that the Federal Reserve is edging towards stimulating the U.S. economy after a drop in U.S. new home sales. The Census Bureau reported yesterday that new home sales fell by 8.4% to a seasonally adjusted 350,000 units in June, lower than the expected decline of 2.6% to 372,000 and the steepest slide since February 2011. New home sales for May were revised up to 382,000 units from a previously reported 369,000, whilst the average price fell 1.5%
With the Federal Reserve’s monetary policy body meeting on July 31 for a 2 day conference, consensus is growing that the Fed will implement a fresh round of easing measures. This would normally be bullish for stocks, but concerns over the global economy kept the stock gains in check.
In Europe, the yield on Spanish 10 year bonds increased to a euro era high of 7.71%, well above the 7% threshold considered unsustainable by the markets. Whilst in Germany, the Ifo research institute reported its Business Climate Index fell to 103.3 in July, the lowest level since June 2010, from a reading of 105.2 in June after markets were expecting a 104.7 reading. The Euro was down against most major currencies as was 0.09% down against the USD.
Also falling was the British Pound after it was reported yesterday that the UK recession has deepened. The economic output fell by 0.7% between April and June, much larger than expected and follows a 0.3% drop in the first 3 months of the year.
Binary Traders will keep a sharp focus on the USD today as the U.S. is set to release official data on durable goods orders, a leading indicator of production, as well as data on pending home sales and initial jobless claims – all key indicators in the health of the US economy.
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