The number of new US homes sold during July rose by 2.8 per cent, wrong footing the market which had been expecting sales to fall to their lowest level in seven years.

The Dow Jones Industrial Average jumped 43.9 points to 13279.70 after making a slow start to today's trading but the pound remained above $2.

Analysts had expected new home sales to fall from 834,000 in June to 820,000 during July. Instead, they rose to 870,000.

Last week, the US Commerce Department said new housing starts fell 6.1 per cent in July. The annual rate of 1.381 million new houses implied by this is the lowest level in a decade.

While today's figures from the US Commerce Department provide good news following weeks of market turmoil sparked by high numbers of defaults in the sub-prime mortgage market, the Federal Reserve is expected to remain under pressure to cut interest rates.

Dimitry Fleming, an analyst at ING, said: "Since late 2005, new home sales have plunged 30 per cent and there is absolutely nothing flagging a near-time recovery. The problems in the sub-prime sector have spilled over into the rest of the mortgage market, increasingly frustrating potential buyers' access to credit."

Angelo Mozilo, chief executive of Countrywide, America's largest mortgage lender, predicted no improvement in the country's housing market, particularly in the sub-prime sector.

"I've seen this movie before, and the ending of the movie always ends up in some form of recession," he said in an interview.

Countrywide was forced to go to its lending banks for credit last week after being shut out of the commercial paper market, which is geared to very short-term borrowing and has been spooked by volatile credit markets.

Two days ago Bank of America ploughed $2 billion of investment into the firm, helping it to stage a stock market recovery.

On the upside, US orders for durable goods jumped 5.9 per cent in July, up 1.9 per cent compared to the forecast 1 per cent rise, after being boosted by manufacturers holding smaller inventories while there was more demand for American products.

Alan Mulally, the chief executive of the car giant Ford, said yesterday that the Fed's job of managing economic growth was now a particular priority.

"Something we are all concerned about is the macroeconomy. Especially right now in the US with sub-prime and fuel prices," he said.

Like rivals, Ford has been battling against a decline in US consumer sentiment and the slide in economic confidence, as well as competition from lower-cost producers in Japan.

It has put its prized Jaguar and Land Rover marques up for sale. A potential buyer is Ripplewood Holdings, the New York based firm that earlier this month recruited former Ford president Nick Scheele.

Bob Dover, the former chairman and chief executive of Jaguar and Land Rover, is understood to have hooked up with private equity group TPG for a £1.5 billion bid for the brands.

Today’s new house figures will do little to inject stability into the wholesale credit markets, which have been rocked by soaring delinquency rates among lower-quality American mortgage borrowers.

"It's hard to imagine that we're anywhere near a turnaround," Brian Bethune, an economist at Global Insight in Massachusetts told Bloomberg. "We're certainly not going to see an inflection point until the dust has settled on the current credit conditions problem."

The dollar fell against the yen and the euro as traders began to predict the Fed will cut the cost of borrowing by 0.25 per cent at its two-day meeting on September 18. This would cut interest rates in America to 5 per cent, with economists beginning to predict a level of 4.75 per cent by the end of the year.

A total of 45 of 63 economists surveyed by Reuters said the Fed will cut rates next month. Six of those surveyed reckon the American central bank will move even before then.

But the pound gave ground and hovered around the $2 level.

Explore Economics

• Pre-Budget Report 2009

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive