The main focus during the USA session was data, and the market largely failed to react to US Q1 final GDP, which came in much stronger at +2.0% vs +1.4% expected.
Pending homes sales in the U.S. fell 2.7% in May compared to April, according to the National Association of Realtors. Regionally, pending home sales in the Northeast surged, while the three other regions in the U.S. declined.
US housing data has been strong lately, but this is a miss in a forward-looking indicator. There are signs that rate buy-downs are pushing people towards new construction rather than existing homes. The report could also indicate a lack of inventory, as new listings are down 25% compared to last June.
The pending home sales report measures to the number of homes that have been sold but not yet closed. Essentially, a contract has been signed but the transaction has not yet been completed.
The National Association of Realtors (NAR) releases a Pending Home Sales Index (PHSI) each month that measures housing contract activity. The data is based on signed real estate contracts for existing single-family homes, condos, and co-ops. This is a forward-looking indicator as it represents transactions that will be closed in the coming months.
Also, data today showed that the number of Americans filing for unemployment benefits fell by 26,000 from the prior week’s 20-month high to 239,000 on the week ending June 24th, the sharpest drop since October 2021 and below market estimates of 265,000.
The results somewhat extended the period of labour-market resilience to higher borrowing costs from the Federal Reserve, easing recent concerns of a marked softening.
In the meantime, continuing claims fell by 19,000 to 1,742,000 in the prior week, the lowest in four months, reflecting that conditions for jobseekers to find employment may be improving.
The price of Gold is also reversing after falling to the lowest since May. There’s a solid correlation between 5-year US yields and gold but what hasn’t changed today is that bond yields are still at the highs of the day.