Officials from the major central banks were out in force yesterday, attempting to soothe panicky stock markets. Two more Fed officials told reporters that quantitative easing in the U.S. would remain as long as needed, while a European Central Bank official said that EU bond yields should be protected from the eventual end of U.S. easy money policy. The Peoples Bank of China reassured their domestic markets that they were monitoring liquidity risk and that it was under control. The official reiterated that the PBOC would support those banks that support “the real economy” should they run into liquidity problems, reenforcing the government’s stance that those banks making risky under the table loans and participating in real estate speculation did so at their own risk.
Gold had risen slightly overnight on the reassurances, but dipped on a slate of good economic news in the U.S. After the recent selloff, Wall St. has decided that good news is not bad news, and rallied on reports of increased consumer confidence, better durable goods orders, and rising new home sales and home prices.
Consumer confidence was reported at 81.4 in June, up from 74.3 in May. Durable goods orders increased 3.6%, beating market expectations. New home sales were up 2.1% in May, to the fastest level in almost five years, while year-over-year home prices rose at the fastest pace in over seven years in April. Most of the market seems unconcerned about the level of institutional buyers of homes, compared to families buying as a primary residence. Only a minority see a re-ignition of the housing bubble, where REITs could dump houses on the market once interest rates rise, and higher mortgage rates mean fewer buyers.
10-year Treasuries are lower, with yields rising over 1.5% to 2.59%. The dollar index rebounded on the New york open, rising over a half point to 82.6. The euro has fallen slightly to just below 1.31, and the yen is floating between 98 and 97 to the dollar.