INSTANT VIEW: U.S. housing starts rise; jobless claims fall

NEW YORK (Reuters) - New U.S. housing starts and permits rose in August to their highest level since November, lifted by a rebound in multifamily homes, a government report showed on Thursday.

The number of U.S. workers filing new claims for jobless benefits unexpectedly fell by 12,000 last week, data on Thursday showed, while there was a rise in the number of those still on the benefit rolls after an initial week of aid.

KEY POINTS:

HOUSING STARTS * The Commerce Department said housing starts rose 1.5 percent to a seasonally adjusted annual rate of 598,000 units, just shy of market expectations for 600,000 units. * July's housing starts were revised upward to 589,000 units from the previously reported 581,000 units. * Groundbreaking for single-family homes, however, fell 3 percent in August to an annual rate of 479,000 units, after five straight monthly increases. * Starts for the volatile multifamily segment jumped 25.3 percent to a 119,000 annual pace, reversing the previous month's slump.

COMMENTS:

SEAN SIMKO, FIXED INCOME PORTFOLIO MANAGER, SEI, OAKS,

PENNSYLVANIA:

"Housing starts are in line with expectations. The expectation was for permits to be a little bit stronger. It is a forward looking number and the fact that it is modestly lower is disappointing.

"Initial claims ticked modestly lower, as expected remaining somewhat elevated. Continuing claims though ticked modestly higher, which is the concerning piece. It shows that it is difficult for jobseekers to find employment. We need to see the continuing claims number improve for a sustained move higher in the economy.

"The markets in general are taking these (the data reports) in stride."

TORSTEN SLOK, SENIOR ECONOMIST, DEUTSCHE BANK, NEW YORK:

"The housing market continues its stabilization but we are still worried about the mountain of foreclosures we have ahead of us. The downward trend in housing has been broken. Looking ahead our main worries are the 1.5 million excess inventory of homes and the 2 million foreclosures that we expect to see over the coming year. Foreclosures and the excess inventory are likely to be depressants for home prices for the rest of 2009."

MATTHEW STRAUSS, SENIOR CURRENCY STRATEGIST, RBC CAPITAL

MARKETS, TORONTO:

"Housing starts are broadly in line with expectations, pointing to a bottoming in the housing sector, if not a slight recovery. Initial jobless claims, on the other hand, were slightly better than expected and augurs well for September's non-farm payrolls report. The impact on the FX market was a little muted. We did get a move on dollar/yen and that was probably on the back of the jobless claims data. Overall these are good numbers that will keep risk appetite up.

LARRY MILSTEIN, HEAD OF GOVERNMENT AND AGENCY TRADING, R.W.

PRESSPRICH & CO., NEW YORK:

"The numbers are really in line. The market is really reacting to worries about dissent at next week's FOMC meeting. But I don't see the Fed the tightening until the job picture improves, not things getting less bad, but actual job creation.

"The backdrop doesn't look good for bonds. We have a weak dollar and the increase in stocks and the supply here and from overseas sovereigns issuing dollar-denominated debt. The key (supporting Treasuries) is that there is tremendous of cash on the sidelines. Investors are being forced to go out the curve. That's putting the caps on rates."

JOHN CANALLY, ECONOMIST, LPL FINANCIAL, BOSTON:

"The housing market is going to make a positive contribution to GDP in the third quarter, which is probably a quarter sooner than I would have thought.

"The Fed wants to see the housing market recover. I think the Fed wants to see that we can get foreclosures down and to keep interest rates low enough so that the housing recovery can take hold.

"They don't want to pull the rug out from under the recovery, it's only one quarter old. We've had 14 consecutive quarters of negative contribution to GDP from housing, and they don't want to get one positive quarter and then have it go back in the tank.

"The Fed will want to keep rates low long enough, they want to keep the mortgage market functioning."

ALAN GAYLE, SENIOR INVESTMENT STRATEGIST, RIDGEWORTH

INVESTMENTS, RICHMOND, VIRGINIA: JOBLESS CLAIMS- "The drop in initial claims suggests that the severe pressures on the labor market continue to subside. Clearly the strains remain, but we are seeing some gradual improvement from the peaks we were at some months ago." HOUSING STARTS- "This data shows that we're continuing to see continued improvement on the housing front after an extended period of decline. This suggests that the market is moving toward stability. But given the run-up we've seen in the market, I doubt that this incremental news will have much of a market impact today."

MARKET REACTION: STOCKS: U.S. stock index futures add to losses BONDS: U.S. Treasury debt prices turn negative DOLLAR: U.S. dollar extends gains versus yen