The National Association of Realtors reported yesterday that sales of existing homes dropped by 3.8 percent last month to a seasonally adjusted annual rate of 5.75 million units. It was the slowest sales pace in 4 years. The rate in May was 5.98 million.

The median price of a new home edged up to US$230,300 (HK$1.79 billion) in June, a small 0.1 percent increase from the sales price a year ago. That was the first year-over-year price increase in 11 months but analysts cautioned that it would take many more months to determine whether the downward trend in prices has stabilized.

Rising borrowing costs are discouraging buyers, leaving a glut of unsold homes on the market and dimming prospects for a quick recovery in housing. Federal Reserve policymakers last week trimmed their economic growth forecast amid persistent weakness in home building.

"There's no evidence we've hit bottom yet in home sales," said James O'Sullivan, senior economist at UBS Securities in Stamford, Connecticut. "The housing recession continues. There may be spillover into consumer spending yet to come."

The supply of homes for sale fell 4.2 percent to 4.2 million, the first decline in inventories this year. At the current sales pace, that represented 8.8 months' worth, the same as at the end of May.

US mortgage applications fell for the first time in four weeks, touching a five-month low and largely reflecting a drop in demand for home purchase loans.

The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ended July 20 decreased 3.6 percent to 609, the lowest level since the week ended February 16 when it stood at 606.6.

Moody's Investors Services, meanwhile, said the credit market rout caused by the slump in US subprime loans gives "serious reasons to worry" and is a "reality check," without posing a systemic threat.

While the turmoil has caused some investors to reassess credit risk, others are ready to acquire assets at lower prices, given the "ample liquidity" available, Moody's said.

The readiness to buy means there is no generalized threat to the integrity of the financial system, Moody's said.

Moody's, Standard & Poor's and Fitch Ratings have been criticized by investors because their ratings on bonds backed by mortgages to people with poor or limited credit did not reflect the highest default rate in 10 years.

Some bonds backed by subprime mortgages fell by more than 50 cents on the dollar this year without their credit ratings changing.

Wall Street rebounded after strong quarterly earnings from Amazon.com and Boeing helped offset fears that the slumping housing industry will weaken the economy.

In mid-morning trading, the Dow Jones Industrial Average rose 0.53 percent to 13,789.06.

The dollar jumped broadly yesterday in a technical rebound from record lows against the euro, shrugging off fresh signs of deterioration in the US housing sector.

The euro fell to a session low of US$1.3710 from US$1.3730, where it was before the home sales data. It settled around US$1.3715, down 0.8 percent on the day and way off record highs above US$1.3850 hit Tuesday.

Against the yen, the dollar's gains were more modest, rising 0.3 percent to 120.40 yen.

Sterling weakened came off its 26-year high against the dollar on a wave of profit taking. By late afternoon in London sterling was at US$2.0520, more than a cent off a 26-year peak of US$2.0656 reached Tuesday.

Heavy sales related to a rebounding dollar sent US gold futures more than 1 percent lower, as investors consolidated profits after the recent rally.

Gold for August delivery on the COMEX division of the New York Mercantile Exchange was down US$9.20 at US$675.60 an ounce.

Oil prices slipped after weekly US inventory data showed refined fuel stocks rose more than expected while crude oil stocks fell.

London Brent crude fell 44 US cents to US$74.64 a barrel mid-afternoon, off a high of US$75.23 struck ahead of the US data.

US crude for September traded 21 US cents down at US$73.78.

Industrial & Commercial Bank of China overtook Citigroup as the world's largest bank by market value after less than a year as a public company.

ICBC's shares rose 2.6 percent in Shanghai to close at 5.84 yuan (HK$6.04), taking its market capitalization to US$246 billion, more than the US bank's US$243.9 billion. Citigroup earned more than three times as much as ICBC last year. AGENCIES