Friday, 3 December 2010

US pending home sales jump, ECB continues bond purchases

US economic data on Thursday were pretty good. From Bloomberg:

Pending sales of U.S. existing houses unexpectedly jumped by a record 10 percent in October, indicating the industry at the center of the last recession is stabilizing as the job market improves.

The increase in the number of Americans signing contracts to buy previously owned homes followed a 1.8 percent drop in September, the National Association of Realtors said today in Washington...

The number of applications for jobless benefits averaged 431,000 a week over the month ended Nov. 27, the lowest level since August 2008, Labor Department figures showed. Claims increased by 26,000 last week, more than forecast, to 436,000, after reaching a two-year low.

Investors, however, are keeping a close eye on developments in Europe. Bloomberg reports the latest decisions from the ECB:

The European Central Bank delayed its withdrawal of emergency liquidity measures and bought more government bonds as President Jean-Claude Trichet pledged to fight “acute” financial market tensions.

Under pressure from investors to lead the charge against the spreading sovereign debt crisis, Trichet said the ECB will keep offering banks as much cash as they want through the first quarter over periods of up to three months at a fixed interest rate. As he spoke, ECB staff embarked upon a new wave of purchases, triggering a surge in Irish and Portuguese bonds.

“Uncertainty is elevated,” Trichet told reporters after the ECB’s Governing Council left its benchmark interest rate at 1 percent today. “We have tensions and we have to take them into account.”

The ECB's actions helped steady markets on Thursday, but Europe's sovereign debt problems seem never-ending. From another Bloomberg report:

Greece was warned it could receive a lower credit rating from Standard & Poor’s as proposed European Union rules threaten to hurt bondholders.

Greece’s ‘BB+’ long-term sovereign rating was placed on “CreditWatch” with negative implications, Standard & Poor’s Ratings Services said in a statement today from Madrid. S&P said it is assessing credit implications of the so-called European Stability Mechanism that may govern European Union sovereign bonds beginning in July 2013.

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