Market 08/23: New home sales unexpectedly surge

Market expects FED to go 'easy' on interest rate policy after pessimistic data on economic strength

S&P Global index for US manufacturing came in lower than expected this morning with manufacturing output dropping to 47 from 49 last month and services to 51 from 52.3 previously.

Report shows US economy and especially industrial production continue to trend downward in Q3 with stock market and investors expecting FED to be more 'lenient' on interest rate policy as Jackson Hole event opens tomorrow.

This reverses yesterday's pessimistic sentiment when the spread in FED expected interest rates for 12/2023 and 12/2024 narrowed, indicating investors losing confidence in rate cuts next year.

August new home sales surge. Homebuyers' mortgage demand drops to 28-year low.

After yesterday's decline in existing home sales data, August new home sales rose +4.4% from previous month to 714,000 units, up +31.5% YoY.

The gap between new and existing home sales widens.

The average mortgage rate on all US mortgages is 3.6%, much lower than current rates, the main reason existing home supply remains low.

Looking at the purchase application index declining for six straight weeks, lowest since 1995, shows home purchase loan demand has also fallen.

Average mortgage payment for existing homes with 20% down payment at current interest rates:

WTI oil inventories decline ahead of inventory report

American Petroleum Institute (API) says crude oil inventories fell 2.4 million barrels last week (less than expected 2.9 million), which can be seen as a positive signal supporting oil prices. Conversely, gasoline inventories unexpectedly rose.

WTI oil price recovers slightly to 79.80 USD/barrel after China's economic outlook worsens.

Some other news:

• Tesla announces production target cut for German factory to 4,350 vehicles per week in July and August, expected to decrease further.

• Chevron ramp up natural gas production in Australia amid strike concerns over wages and job security.

• Netflix says account sharing restrictions lead to high new sign-ups.