Housing sector lifts U.S., European stocks; oil pares gains

August 22, 2016 8:49 PM EDT

An investor walks past a board displaying stock prices at the Australian Securities Exchange (ASX) in Sydney, Australia, June 27, 2016. REUTERS/David Gray

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By Hilary Russ

NEW YORK (Reuters) - Homebuilders provided a modest lift to both U.S. and European stock markets on Tuesday, while oil prices got a brief boost from Iran's positive signals on an output freeze.

On Wall Street, technology companies led the Nasdaq to a record intraday high and robust housing market data strengthened the case for a firming economy.

Housing stocks jumped 2 percent <.HGX> after the Commerce Department reported new U.S. single-family home sales soared unexpectedly in July to near nine-year highs.

European equities rose 0.9 percent <.STOXX>, led by mining stocks, after data pointed to continuing gradual improvement in the region's economy.

Shares of the region's homebuilders also gained following a solid update from UK homebuilder Persimmon , which closed 4.2 percent higher and was the biggest riser on the blue-chip FTSE 100 <.FTSE>. The index closed at its highest level since the UK voted to leave the European Union.

The housing data helped traders fill the gap as markets await further clues on whether the Federal Reserve will raise U.S. interest rates this year. Global central bankers gather in the mountains of Wyoming later this week and investors are focused on a speech by Fed Chair Janet Yellen on Friday.

"If we continue to keep getting strong economic data it will become hard for the Fed to rationalize not hiking rates," said Erik Wytenus, global investment specialist at J.P. Morgan Private Bank in Palm Beach Florida.

The Dow Jones industrial average <.DJI> rose 17.88 points, or 0.1 percent, to 18,547.3, the S&P 500 <.SPX> gained 4.26 points, or 0.2 percent, to 2,186.9 and the Nasdaq Composite <.IXIC> added 15.48 points, or 0.3 percent, to 5,260.08.

Big gains in oil prices, which had jumped as much as 2 percent on signals from Iran, were squeezed in post-settlement trading after data showed a surprise build-up in U.S. crude stocks.

The American Petroleum Institute reported that crude inventories rose by 4.5 million barrels in the week to Aug. 19, to 524.2 million. Analysts had expected a decrease of 455,000 barrels. [EIA/S]

After settling much higher, brent crude was still trading up about 37 cents, or 0.8 percent, at $49.53 per barrel, while U.S. West Texas Intermediate crude was up 69 cents, or 1.5 percent, at $48.10.

The bump in new home sales helped the U.S. dollar trim losses. But having hit a five-day high of 94.958 against a currency basket <.DXY> on Monday, the greenback was flat at 94.533 late in the day.

New Zealand's dollar, meanwhile, rose 0.47 percent to $0.7302 after the country's central bank forecast another 35 basis points in possible rate cuts, less than many investors had wagered on.

"The (U.S.) dollar is weakening... due to the general anticipation around Jackson Hole on Friday," said Saxo bank's head of FX strategy John Hardy.

"There is also a general reach for yield happening. That was one of the things we saw with (New Zealand central bank Governor Graeme) Wheeler waving the white flag that he is not going to use easing to try and weaken the currency."

(Reporting by Hilary Russ in New York; Additional reporting by Chuck Mikolajczak, Gertrude Chavez-Dreyfuss and Barani Krishnan in New York; Yashaswini Swamynathan in Bengaluru; Editing by Nick Zieminski and Dan Grebler)

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