U.S. Markets: The major indexes posted gains for the week, lifting the benchmark S&P 500 index to within roughly 0.2% of its all-time high from February.  The Dow Jones Industrial Average added almost 500 points, rising 1.8% to 27,931.  The technology-heavy Nasdaq Composite ticked up just 0.1% to 11,019.  By market cap, the large cap S&P 500, mid cap S&P 400, and small cap Russell 2000 all coincidentally finished the week up 0.6%.

International Markets: Canada’s TSX was the only major international index to finish in the red last week, finishing down  0.2%.  The United Kingdom’s FTSE added 1.0%.  France’s CAC 40 and Germany’s DAX rose 1.5% and 1.8%, respectively.  In Asia, China’s Shanghai Composite added 0.2%, while Japan’s Nikkei jumped 4.3%.  As grouped by Morgan Stanley Capital International, developed markets rose 1.8% and emerging markets added 0.8%.

Commodities: Gold had its first down week in more than two months closing at $1949.80 an ounce, a decline of  3.9%.  Silver declined an even steeper -5.3% to $26.09 per ounce.  Crude oil finished up for a second week.  West Texas Intermediate crude oil finished the week at $42.01 per barrel—a gain of 1.9%.  The industrial metal copper, viewed by some analysts as a barometer of world economic health due to its wide variety of uses, rebounded 2.4% last week. 

U.S. Economic News: The number of Americans filing for first-time unemployment benefits fell by 228,000 last week to 963,000.  Economists had expected 1.1 million new claims.  This was the lowest level since March when the economic shutdown from the coronavirus took hold.  While still far from normal, the decline in initial claims suggests gradual improvement in labor market conditions.  It also implies that the economic recovery that had stalled in July is getting back on track.  Continuing claims, which counts the number of Americans already receiving benefits, fell by 604,000 to 15.486 million. 

The number of job openings rose by over half a million in June, according to the latest data from the Labor Department.  The Job Openings and Labor Turnover Survey, known as the JOLTS report, showed job openings rose by 518,000 to 5.9 million at the beginning of summer.  The reading was above the median forecast of 5.3 million.  The increase followed a gain of 375,000 in May.  The largest gains in openings came from accommodation and food service, other services and arts.  The biggest declines were in construction and state and local government education.  The number of people who voluntarily left their jobs, known as the “quits rate”, rose to 1.9% from 1.8% in May.  That reading remains significantly below its peak of 3.2% before the pandemic hit.

Confidence among the nation’s small business owners slipped last month as cases of the coronavirus continued to surge across the country.  The National Federation of Independent Business (NFIB) reported its Small Business Optimism Index came in at 98.8 in July, a 1.8 point decline from its June reading.  Economists had expected a reading of 99.9.  The NFIB is a monthly snapshot of small businesses in the U.S., which account for nearly half of private sector jobs.  Economists look to the report for a read on domestic demand and to extrapolate hiring and wage trends in the broader economy.  NFIB's chief economist Bill Dunkelberg stated, “This summer has been challenging for many small business owners who are working hard to keep their doors open and remain in business.”

Prices at the wholesale level posted their biggest increase in nearly two years last month, but inflationary pressures were still largely invisible in the economy analysts said.  The Producer Price Index (PPI) for final demand jumped 0.6% in July, the most since October 2018, and double the consensus of 0.3%.  Core PPI, or PPI ex-food and energy, rose 0.3%, also the most since October 2016, and above the consensus of 0.1%.  On an annual basis, the PPI for final demand was still down 0.4% indicating inflation doesn’t appear to be an issue anytime soon.  Scott Brown, chief economist at Raymond James stated, “Figures have been choppy in recent months, but there is no significant upward pressure on wholesale prices.”

At the consumer level prices jumped for a second month in a row, but as with prices at the producer level, overall inflation remains low.  The consumer price index rose 0.6% in July.  Economists had forecast a 0.4% advance.  The increase in consumer prices over the past 12 months, meanwhile, rose to 1% from 0.6% in June.  Just seven months ago, at the start of 2020, the yearly pace of inflation had climbed to as high as 2.5%.  Another closely watched measure of inflation that strips out food and energy also shot up 0.6% last month.  The increase in the core rate was the largest since 1991, but it follows a record decline.  The yearly increase in the so-called core rate moved up to 1.6% from 1.2%.

Sentiment among the nation’s consumers remained nearly flat in a preliminary August survey.  The University of Michigan’s Consumer Sentiment Index ticked up only 0.3 points to 72.8.  The consensus was for a reading of 71.0.  In the details, expectations ticked up 0.6 points while current conditions edged down 0.3 points.  At the end of the day, sentiment was still near its lowest level since July 2012, and significantly below its pre-recession high of 101.0, as consumers remain cautious.  On an annual basis, the sentiment index is still down 18.9%.  Although there has been a marginal improvement since May, such negative momentum has historically been associated with an economic slowdown or recession.

International Economic News: After helping to guide the Bank of England through Britain’s exit from the European Union, former Bank of Canada governor Mark Carney has been attracting attention advising Canadian Prime Minister Justin Trudeau on his government’s response to the COVID-19 pandemic.  Carney "certainly has been advising the PM through different phases of this," said a senior government official speaking on background. "I'd hope we can count on him for more."  Carney has long been rumored to have political aspirations since returning to Canada after his term with the Bank of England expired earlier this year.  Many in Liberal Party circles see Carney as a top candidate for finance minister should he seek office or as a possible leadership candidate to eventually succeed Trudeau.  

Economic output in the United Kingdom crashed by -20.4% in the second quarter of 2020.  It was England’s worst quarterly slump on record and pushed the country into the deepest recession of any major global economy.  UK finance minister Rishi Sunak said in a statement, “Today's figures confirm that hard times are here.  Hundreds of thousands of people have already lost their jobs, and sadly in the coming months many more will.”  Compared with the end of 2019, UK economic output fell by a cumulative -22.1% in the first six months of 2020, a worse outcome than Germany, France and Italy, and double the 10.6% fall recorded in the United States, the Office for National Statistics said.

On Europe’s mainland, the Bank of France reported economic activity ran at 7% below normal levels in July, a slight improvement from June.  In its monthly update on business conditions, the central bank said the Eurozone’s second biggest economy contracted 13.8%, in line with its forecast.  “The rebound continued in July, at a more moderate rhythm, in line with the trajectory anticipated last month,” the bank said.  The positive trend continued just as France and other European governments took new measures to curb a renewed rise in infection rates, desperate to avoid a return to the lockdowns that battered economies globally.

Investor sentiment in Germany picked up more than expected, a recent ZEW survey showed.  The ZEW survey of investors’ economic sentiment rose to 71.5 from 59.3 points the previous month, far exceeding the consensus forecast of 58.0.  “Hopes for a speedy economic recovery have continued to grow,” said ZEW President Achim Wambach.  However, experts were much more downbeat about current conditions in Germany.  The index tracking that dropped 0.4 point to -81.3—far worse than the forecast of -68.8.  Wambach said assessments from individual sectors showed that experts expect a general recovery, especially in domestic sectors. “However, the still very poor earnings expectations for the banking sector and insurers regarding the coming six months give cause for concern,” he added.

In Asia, China’s economic activity continued to improve last month according to the latest economic data from China’s National Bureau of Statistics.  Industrial production rose 4.8% in July compared to the same time last year, on par with the increase in June.  However, retail sales, a major gauge of China’s consumption fell 1.1% in July.  That followed a 1.8% drop in June and missed economists’ expectations that it would stay flat.   The decline in retail sales was broad based with garments, cosmetics, home appliances and furniture all worsening from June.  A key exception was auto sales, which surged 12.3%, turning around from an 8.2% fall in June.

Japan’s economy shrank last quarter by the most ever recorded, official data is set to show next week.  Analysts expect gross domestic product to contract at an annualized -27% in the second quarter.  That means the world’s third-largest economy will have declined in size for three straight quarters, hit first by trade wars and a sales tax hike, then by the virus.  A five-week nationwide state of emergency devastated consumption in the second quarter as people stayed at home and businesses closed, but retail sales and factory output in Japan are already showing signs of recovery.  Still, weak overseas demand for cars and other Japanese exports is likely to continue and there will be no Olympics spending boost from tourists this quarter with the Games postponed.  Furthermore, analysts aren’t hopeful of a quick turnaround.  “What happens after this really depends on COVID-19,” said economist Yoshiki Shinke at Dai-Ichi Life Research Institute.  “I don’t think the economy will return to pre-pandemic levels anytime soon.”

 (Sources:  All index- and returns-data from Yahoo Finance; news from Reuters, Barron’s, Wall St. Journal, Bloomberg.com, ft.com, guggenheimpartners.com, zerohedge.com, ritholtz.com, markit.com, financialpost.com, Eurostat, Statistics Canada, Yahoo! Finance, stocksandnews.com, marketwatch.com, wantchinatimes.com, BBC, 361capital.com, pensionpartners.com, cnbc.com, FactSet.)