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Stocks, dollar recover as markets try to move past Trumps policy stumble


Asian stocks advanced on Tuesday after Wall Street stabilized and the dollar was steady, as anxiety over Donald Trump's setback on healthcare reform gave way to tentative hopes for the U.S. president's planned stimulus policies. European markets were also set for a stronger start, with financial spreadbetters expecting Britain's FTSE 100 . FTSE and France's CAC 40 . FCHI both to open 0.3 percent higher and Germany's DAX . GDAXI to start the day up 0.4 percent. MSCI's broadest index of Asia-Pacific shares outside Japan . MIAPJ0000PUS added 0.5 percent. Japan's Nikkei . N225 closed up 1.1 percent, its biggest one-day gain in more than two weeks, while Australian stocks ended the day 1.3 percent higher, their strongest performance since Nov. 23. South Korean stocks . KS11 climbed 0.4 percent after data showed the domestic economy grew at a slightly faster pace than initially thought in the fourth quarter of 2016, supported by strong construction activity. Hong Kong's main Hang Seng . HSI added 0.5 percent. China's market was one of the region's underperformers amid concerns about tightening liquidity conditions after the central bank refrained from injecting short-terms funds into the banking system for the third session in a row. The CSI 300 . CSI300 index was about 0.2 percent lower and the Shanghai Composite . SSEC was down 0.4 percent Overnight, the S&P 500 . SPX and the Dow Jones Industrial Average . DJI closed lower but narrowed their losses from earlier in the session, when both hit near-six-week lows. The Nasdaq . IXIC ended higher.

Stock markets, which went on a tear after Trump's November election win, got an added lift from the Federal Reserve's less-hawkish-than-expected stance in mid-March. But doubts about Trump's ability to keep his promises of fiscal stimulus, including tax reform, halted the rally. Trump's failure late last week to garner enough support for a plan to repeal the Affordable Care Act, former President Barack Obama's signature health care bill, even with a Congress controlled by the leader's Republican party, further dented sentiment. While that blow stoked concerns about the president's ability to enact stimulus policies, these began to recede overnight as investors looked with renewed, albeit tentative, optimism to the U.S. government's next policy steps."Markets appear reluctant to take the Trump disappointment too much further at this stage," Ric Spooner, chief market analyst at CMC Markets in Sydney, wrote.

"With U.S. economic growth showing signs of improvement and the (Fed) clearly embarked on a monetary tightening cycle, the significant correction that has already occurred in bonds and the U.S. dollar may already reflect an adequate wind-back of the market’s Trump exuberance." Tim Condon, economist at ING Financial Markets, said in the Reuters Global Market Forum chatroom that he "would not anticipate any more Democrat support for Republicans' tax reform than for ObamaCare reform."But "the good news for investors is that the global economy is picking up," Condon said. "I view the current selling as a buying opportunity." The U.S. 10-year bond yield US10YT=RR, which hit a one-month low on Monday, rose to 2.3836 percent on Tuesday. The dollar was little changed at 110.63 yen JPY=D4 after recovering from its lowest level since November on Monday.

The dollar index . DXY inched up to 99.226 after slumping to a 4-1/2-month low on Monday. The euro EUR=EBS was steady at $1.0861 on Tuesday, after touching its highest point since November on Monday. Sterling GBP=D3 was flat at $1.2554, with Prime Minister Theresa May due to formally notify the European Union of Britain's intention to leave the club on Wednesday. It hit a seven-week high on Monday. In commodities, the return of risk appetite and the dollar's relative weakness helped lift oil from a level close to the 3-1/2-month low seen last week, but gains were capped by lingering concerns about whether OPEC-led output cuts can offset surging U.S. production. U.S. crude CLc1 gained 0.5 percent to $47.98 a barrel, after dropping as much as 1.9 percent on Monday. Global benchmark crude LCOc1 rose 0.5 percent to $50.99. Gold XAU= was flat at $1,253.83 an ounce on Tuesday, after pulling back from the one-month-high touched on Monday.

Tight supply, higher prices weigh on U.S. home sales


U.S. home resales fell more than expected in February amid a persistent shortage of houses on the market that is pushing up prices and sidelining prospective buyers. The National Association of Realtors said on Wednesday existing home sales declined 3.7 percent to a seasonally adjusted annual rate of 5.48 million units last month after hitting a 10-year high in January. Sales were up 5.4 percent from February 2016, underscoring the sustainability of the housing market recovery despite the supply constraints. The median house price surged 7.7 percent from a year ago to $228,400 in February. That marked the 60th consecutive month of year-on-year price gains."There is a small supply of homes for sale and great demand for them, and that's driving prices higher in many markets. We believe the strong appetite for homes will continue, people just need more homes to choose from," said Gino Blefari, president at Berkshire Hathaway HomeServices in Orange County, California. Economists had forecast sales decreasing 2.0 percent last month. In February, houses typically stayed on the market for 45 days, down from 59 days a year ago. Despite February's sales drop, the housing market was on track to again contribute to economic growth in the first quarter through increases in homebuilding and broker commissions. U.S. financial markets were little moved by the data as investors focused instead on potential delays to President Donald Trump's economic agenda, including his pledge to cut taxes. The PHLX housing index fell 0.5 percent. U.S. stock indexes were mostly weaker while prices for U.S. government bonds rose. The dollar fell against a basket of currencies.

Economists said there were few signs sales had been significantly affected by rising mortgage rates. Although annual wage growth has stubbornly remained below 3 percent, economists expect an acceleration as the job market, which is near full employment, tightens further. The 30-year fixed mortgage rate is hovering at 4.30 percent. The Federal Reserve last week raised its benchmark overnight interest rate by 25 basis points to a range of 0.75 percent to 1.00 percent. The U.S. central bank has forecast two more rate hikes for 2017. LAND, LABOR SHORTAGES

A separate report from the Mortgage Bankers Association onWednesday showed applications for loans to purchase homes fell 2.7 percent last week from near a four-month peak."Despite supply constraints, we see a resilient labor market and solid real income gains as likely to support a decent pace of home sales ahead, although given the backup in rates we may experience some pullback in the near term," said Kevin Cummins, a senior economist at Natwest Markets in Stamford, Connecticut. Last month, sales fell in the Northeast, West and Midwest regions, but rose in the South. Though the number of homes on the market increased 4.2 percent to 1.75 million units last month, housing inventory remained near the all-time low of 1.65 million units hit in December. Supply was down 6.4 percent from a year ago.

Housing inventory has dropped for 21 straight months on a year-on-year basis. Builders have been unable to fill the inventory gap, citing rising prices for materials, higher borrowing costs, and shortages of lots and labor. Lennar Corp, the second-largest U.S. homebuilder, reported on Tuesday a drop in quarterly gross margin as the company struggled with higher land and construction costs. Lennar, however, sold 5,453 homes in the first quarter ended Feb. 28, up from 4,832 homes in the year-earlier period, and reported a 12 percent jump in orders. The NAR estimates housing starts and completions should be in a range of 1.5 million to 1.6 million units to alleviate the chronic shortage. Housing starts are running above a rate of 1.2 million units and completions around a pace of 1 million units. At February's sales pace, it would take 3.8 months to clear the stock of houses on the market, up from 3.5 months in January. A six-month supply is viewed as a healthy balance between supply and demand. While higher prices are increasing equity for homeowners and might encourage some to put their homes on the market, they could be hurting first-time buyers, who accounted for 32 percent of transactions last month. That was well below the 40 percent share that economists and realtors say is needed for a robust housing market but up from 30 percent a year ago.