INSTANT VIEW: Housing starts rise, producer prices fall

NEW YORK (Reuters) - New construction of U.S. homes rose by less than expected in September, held back by a plunge in ground-breaking activity for multi-family homes even as single family dwellings rebounded, according to a government report on Tuesday.

U.S. producer prices dropped an unexpected 0.6 percent in September, mainly due to a 2.4 percent decline in energy prices, the Labor Department said on Tuesday.

KEY POINTS:

HOUSING * The Commerce Department said housing starts rose 0.5 percent to a seasonally adjusted annual rate of 590,000 units, below market expectations for 610,000. August's housing starts were revised down to 587,000 units from the previously reported 598,000 units.

PPI * Analysts polled by Reuters had anticipated prices would remain unchanged after they rose an unrevised 1.7 percent in August. Prices paid at the farm and factory gate also fell 4.8 percent on the year, which was steeper than forecasts of a 4.2 percent drop. * Excluding food and energy, prices declined by a much slimmer 0.1 percent in September.

COMMENTS:

DAN COOK, SENIOR MARKET ANALYST, IG MARKETS, CHICAGO:

HOUSING: "It doesn't bode too well. We really want to see an uptick here, obviously housing is so important.

"If we can get more starts, we're putting more people to work and that would be very positive, and unfortunately we just didn't see that today.

"This should put some pressure on the market, maybe slow down earnings but I still think the focus is going to be on the corporate earnings."

DAVID DIETZE, CHIEF INVESTMENT STRATEGIST, POINT VIEW FINANCIAL

SERVICES, SUMMIT, NEW JERSEY:

PRODUCER PRICES: "We saw the producer price index numbers coming in much softer than expected with negative prints across the board. That is going give to Treasuries a lift.

"We keep waiting for some sort of inflationary pressures to reflect perhaps the better-than-expected earnings that we're seeing in corporate America as we review these third-quarter numbers and surprisingly enough we're just not seeing it.

"Treasury investors with these fairly low rates right now I think had one foot pointed in the direction of the exit and now they're rethinking that.

HOUSING: "Weaker-than-expected numbers coming from housing suggest an economy that is still not mended and that would suggest of course lower loan demand, which would suggest less pressure on prices.

"All of that is really manna from heaven for the Treasury market which really enjoys this weak data because the big bogey man is inflation and that kicks that can further down the road."

NICK BENNENBROEK, HEAD OF FX STRATEGY, WELLS FARGO, NEW YORK:

"The U.S. housing and producer price numbers were a bit disappointing but it wasn't a big deal. We saw a pop in the euro and a fall in dollar/yen as a result. What this shows is the market's bearish view on the dollar. Earlier, the strength in equity markets and decent earnings reports are all proven dollar-negatives from the perspective of risk appetite. And now we've got somewhat disappointing economic data and the market sold the dollar. So it's heads you lose and tails you lose in the case of the dollar. This just goes to show you how bearish the market is on the dollar."

KURT KARL, CHIEF U.S. ECONOMIST, SWISS RE, NEW YORK:

PPI: "It's a deflationary report but it's good news for producers who buy these items. It's not good news for sellers of goods and services. But it's not a serious problem since it's only one month.

"It's good news for consumers whose income is not growing and having problems finding jobs."

HOUSING STARTS: "It's not a strong housing recovery but it is moving above the trough. The pattern of starts is okay but there is not a lot of strength."

DOUG BENDER, MANAGING DIRECTOR, MCQUEEN, BALL & ASSOCIATES,

BETHLEHEM, PENNSYLVANIA:

"The headline PPI numbers fuel the deflationary fears.

"In the housing starts you are at least seeing a stabilization. We are still a far cry from a couple of million units a year, but you have now seen stabilization for several periods. We are maybe forming a bottom. The affordability factor is there for some people, particularly new home buyers.

"The big weakness is still the jobs market. Until you see a turnaround in that, you can't expect to see people building new homes at a ferocious pace."

SUBODH KUMAR, CHIEF INVESTMENT STRATEGIST, SUBODH KUMAR &

ASSOCIATES, TORONTO:

"The housing numbers still look somewhat soft and that's a reflection of weakness in the consumer. The low PPI numbers mean that the Fed is in a position to keep rates unchanged for a while.

"The focus today will only be on earnings, especially industrial companies. With consumers still looking soft, industrials will be the focus."

MARKET REACTION: STOCKS: U.S. stock index futures pare gains BONDS: U.S. Treasury debt prices extend gains DOLLAR: U.S. dollar adds to losses versus yen