US equities extended gains after existing home sales data came out at 10AM ET.
While Bloomberg carries the negative headline that US existing home sales hit a six-month low, the reaction in the stock market was positive as sales fell less than expected.
From Bloomberg: “Purchases of existing homes fell 3.8 percent to a 4.81 million annual pace last month, in line with the 4.8 million median estimate in a Bloomberg News survey of economists, data from the National Association of Realtors showed today in Washington. Preliminary figures showing a jump in contract signings suggest May will prove to be the weakest sales month of the year, according to the group’s chief economist.
Estimates for home sales ranged from 4.5 million to 5.18 million, according to the median of 69 forecasts in the Bloomberg survey. Purchases reached a record 7.08 million in 2005, and slumped to a 13-year low of 4.91 million last year.”
Here is a look at existing home sales going back several years:
The tenor of recent US data has been very soft and while the reading was in line with Bloomberg’s forecast, other outlets including Reuters and Dow Jones Newswire saw expectations for today’s release worse, with forecast of a drop in sales of 5% in May.
The S&P index jumped to 1285 in the wake of the news, and while other currencies showed some muted reaction, the Canadian Dollar picked up steam on the increase in North American risk appetite.
The Canadian Dollar was not hampered much by its own data showing weaker retail sales than expected, perhaps since the release is a bit dated and points to what happened in April.
Retail sales rose 0.3% for the month, below expectations of a 0.6% increase, and if we remove auto sales from the equation sales would have been flat, against disappointing forecasts of a 0.5% gain. On the positive side, the positive gain in sales wipes away the 0.1% decrease in sales the Canadian economy saw in March.
Another positive developments was that the Canadian leading index rose 1.0%, better than expected, which implies that the economy will grow at a stronger pace in the coming months.
That leading index report was more important it seem from a fundamental standpoint and Canadian stocks were stronger on the data and higher commodity prices.
From Marketwatch: Canadian stocks traded higher Tuesday, aided by strengthening commodity prices and strong domestic economic indicators. The S&P/TSX Composite Index was up 116 points, or 0.9%, to 12,973.70. Energy stocks were the big gainer, and the S&P/TSX Capped Energy Index added 1.2%. The sector was boosted by rising oil prices, up 1.1% to trade for over $94 a barrel. The mining heavy S&P/TSX Capped Materials Index was up 1.3%. Kinross Gold Corp. rose 1.4%. Statistics Canada Tuesday said an index of leading economic indicators for May rose 1% while retail sales for April were up 0.3%.
With risk sentiment positive, traders were looking for a commodity-linked currency tied to global growth to put their money into and in the NY morning found it in the Canadian Dollar.
Nick Nasad
Chief Market Analyst
FXTimes
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