INSTANT VIEW: Home sales, Bernanke boost recovery hopes

NEW YORK (Reuters) - Sales of previously owned U.S. homes in July notched their fastest pace in nearly two years, an industry survey showed on Friday, the strongest sign yet that housing was pulling out of a three-year slump.

Separately, Federal Reserve Chairman Ben Bernanke said the global economy appears to be on the mend, but a sluggish recovery looks likely.

KEY POINTS: * The National Association of Realtors said that sales jumped 7.2 percent to an annual rate of 5.24 million units, the highest since August 2007, beating market expectations for a 5 million unit pace. Sales were at a 4.89 million pace in June. * July's percentage increase was the largest monthly gain since the series started in 1999 and marked the fourth straight monthly advance. The last time sales rose for four consecutive months was in June 2004, the NAR said.

BEN BERNANKE SPEECH:

The global economy appears on the mend after a deep downturn, but the recovery is likely to be sluggish and risks remain, Federal Reserve Chairman Ben Bernanke said on Friday.

KEY POINTS: * "After contracting sharply over the past year, economic activity appears to be leveling out, both in the United States and abroad, and the prospects for a return to growth in the near term appear good," Bernanke said in remarks prepared for delivery to an annual Fed conference here. * "Although we have avoided the worst, difficult challenges still lie ahead," he said, cautioning that the "recovery is likely to be relatively slow at first, with unemployment declining only gradually from high levels." * Bernanke said "critical challenges remain" from global financial markets still strained from a severe crisis that broke two years ago. The difficulties households and businesses face in getting loans is another source of stress, he said. * The crisis highlights the need to "urgently" address structural weaknesses in the financial system, particularly in the way governments set rules and supervise it, he said.

COMMENTS:

MARK VITNER, SENIOR ECONOMIST, WELLS FARGO, CHARLOTTE, NORTH CAROLINA:

EXISTING HOME SALES: "My take is that the purchases of first time homebuyers are helping the number out. The $7,000 tax credit will expire in November so people want to close on the deals. We expect activities will remain in this range as more and more people try to take advantage of this first-time home credit.

"Sales and construction bottomed in the first part of the year, but home prices have not bottomed out depending on whether there is a mortgage foreclosure moratorium in place."

BERNANKE'S SPEECH:

"This is what you would expect he would say. There is still a lot of work ahead of us. The recession may have ended, but it's still a very challenging environment out there. There are still threats to the economy. The Fed has be careful about withdrawing the liquidity from the economy."

ALAN RUSKIN, GLOBAL HEAD OF CURRENCY STRATEGY, RBS GLOBALBANKING AND MARKETS, STAMFORD, CONNECTICUT:

"Existing home sales and the Bernanke speech came out simultaneously. Both Bernanke and home sales were 'all aboard' the recovery story!"

BOB WALTERS, CHIEF ECONOMIST, QUICKEN LOANS, LIVONIA, MICHIGAN:

"Homes in this country continue to be on clearance, and consumers are taking notice. Affordable home prices, combined with low rates, have proven to be the medicine that the struggling market needed.

"While this is positive news, I am far more curious to see how sustainable this mini-housing rally will be when rates creep up, like they are sure to do when the Fed stops buying mortgage-backed securities in October. Only then will we know if housing is starting to turn the corner toward recovery."

JACOB OUBINA, CURRENCY STRATEGIST, FOREX.COM BEDMINSTER, NEW JERSEY:

"I think both were more bullish than what the market was looking for. They were looking for just 5 million on the home sales and we got 5.24 million. It's the first print above 5 million since September and suggests sort of a change in the trend that we've potentially carved out a bottom in the home sales market.

"Also, Bernanke was a little bit more bullish than most people were expecting. He's saying that the global economy is starting to emerge from the recession and that the fears of a financial collapse have receded substantially. I think the market is just taking those headlines as extreme positives for the outlook."

RICHARD FRANULOVICH, SENIOR CURRENCY STRATEGIST, WESTPAC, NEW YORK:

"We're having some solid U.S. numbers with existing home sales today, the Empire State and Philly Fed during the week. All these numbers comfortably beat expectations. On top of that we're getting words of encouragement from Ben Bernanke. That's just validating this whole recovery story. So we're seeing all these risk trades in FX further gain ground. We started the week with a lot of doubts and we're ending it with a lot of confidence. I think this has further to run."

MICHELLE MEYER, ECONOMIST, BARCLAYS CAPITAL, NEW YORK:

"Existing home sales were considerably above our consensus expectations of 5.0 million. This is a significant gain, highlighting the improvement in housing conditions. Deep discounts and low mortgage rates, combined with the improving economic outlook, have clearly enticed home buyers."

CALVIN SULLIVAN, BOND ANALYST, MORGAN KEEGAN, MEMPHIS:

"There certainly was surprising strength in the existing home sales.

"There was a predictable reaction in the Treasury market by selling across the curve.

"I still think it is a long slog and many of the investment markets may have gotten ahead of the real economic progress but we're certainly moving in the right direction."

KEVIN FLANAGAN, FIXED INCOME STRATEGIST, GLOBAL WEALTH MANAGEMENT, MORGAN STANLEY, PURCHASE, NEW YORK:

Existing home sales data show that "we are moving in the right direction. I am not ready to be aggressive enough to say that housing will provide a key contribution for support (of economic growth) going forward. but actions as a drag or restraint are going by the board. Now the data is more mixed.

"Given the supply challenges next week, I would not be surprised to see Treasuries come under pressure, especially if stocks respond well to the housing data."

DAN FARETTA, SENIOR MARKET STRATEGIST, LIND-WALDOCK,CHICAGO:

"The data is pretty positive. We got an initial pop off it, and I think it's good for the market all around.

"Existing home sales is a lot of foreclosures, but positive

that people are starting to buy more and get existing inventory off the market. I think we'll continue to see data like this in the upcoming months."

MARKET REACTION: STOCKS: U.S. stock indexes rallied. BONDS: U.S. Treasury debt prices added to losses. DOLLAR: U.S. dollar pared losses against the yen, but fell against the euro.