U.S. Markets: The major U.S. indexes finished the week mostly down after surrendering gains made early in the week.  At its peak on Thursday the S&P 500 moved within about 3% of its all-time high set in February.  The Dow Jones Industrial Average gave up 202 points finishing the week at 26,470, a decline of -0.8%.  The technology-heavy NASDAQ Composite declined for a second consecutive week, ending down -1.3%.  By market cap, the indexes finished the week mixed.  The large cap S&P 500 declined -0.3%, while the mid cap S&P 400 and small cap Russell 2000 rose 0.7% and declined -0.4%, respectively.

International Markets: Canada’s TSX declined -0.8%, while the United Kingdom’s FTSE 100 retraced most of last week’s gain by giving up -2.6%.  On Europe’s mainland, major markets finished the week in the red.  France’s CAC 40 fell -2.2%, Germany’s DAX declined -0.6%, and Italy’s Milan FTSE ended down -1.7%.  In Asia, China’s Shanghai Composite retreated ‑0.5% but Japan’s Nikkei rose 0.2%.  As grouped by Morgan Stanley Capital International, developed markets finished the week down -0.4%, while emerging markets rose 0.9%.

Commodities: Precious metals surged last week as investors reacted to the flood of central bank stimulus in response to the ongoing coronavirus pandemic.  Gold rose for a seventh consecutive week rising 4.8% to $1897 per ounce.  Silver had its biggest move in years leaping 15.6% to $22.85 per ounce.  Oil rose for a second week, adding 1.3% to $41.29 per barrel of West Texas Intermediate crude.  The industrial metal copper, viewed by analysts as a barometer of world economic health due to its wide variety of uses, had its first down week in the last ten, declining -0.4%.

U.S. Economic News: The Labor Department reported the number of Americans seeking first-time unemployment benefits increased by 109,000 last week to 1.416 million.  Economists had expected 1.3 million new claims.  It was the first increase in 16 weeks, and a clear sign that the recent spike in COVID cases has resulted in another wave of layoffs.  Continuing claims, which counts the number of people already collecting benefits, fell by 1.1 million to 16.197 million.  That number is reported with a one-week delay.

The National Association of Realtors (NAR) reported sales of previously owned homes jumped a record 20.7% in June to a 4.72-million-unit annual rate.  Both single-family and condo/co-op sales posted record jumps.  Furthermore, sales rose across all regions, led by the West.  The monthly increase reflects the pent-up demand from the pandemic and record low mortgage rates.  Despite the increase, sales were still down 11.3% from the same time last year.  Months of available supply went back down to 4.0 from 4.8 in June.  Six months of inventory is generally considered to indicate a “balanced” housing market.

Sales of new homes jumped 13.8% last month to an annual rate of 776,000.  The reading was its highest since July of 2007 and exceeded expectations for a reading of 702,000.  The result followed a near 20% rebound the previous month resulting in the biggest back-to-back surge in sales since June 1980.  Year-over-year the momentum was weaker than before the pandemic, but remained up 6.9%.  All four regions posted sales growth from the previous month, and three of the four regions were higher than a year ago.  Months’ available supply slid from 5.5 months to 4.7—the thinnest inventory relative to demand in nearly four years. 

The Conference Board stated its leading economic indicators (LEI) index increased in June but the pace of its improvement slowed.  The LEI rose 2% in June following a revised 3.2% increase in May and a 6.3% drop in April.  The reading was below the consensus forecast of 2.4%.  Seven of its ten components made positive contributions.  Despite the improvement, the indicator remains 8.9% below its pre-recession high.   The six-month rate of change of the LEI improved to -8.4% from a low of -13.0% two months ago.  The year-over-year change also ticked up to -8.6%.  Both indicators suggest the negative economic momentum has diminished. 

Research firm Markit reported private sector business activity continued to improve in July, a sign that the economic recovery is continuing at the start of the third quarter.  Markit stated its flash Manufacturing Purchasing Managers’ Index (PMI) rose 1.5 points to 51.3—its highest level in six months, and in expansion for the first time since February.  Furthermore, its flash Services PMI increased 1.7 points to 49.6, also its best reading in six months, but still in contraction.  Both manufacturers and service providers were more optimistic about the outlook over the coming year, linked to expectations that the pandemic situation will improve.

The Chicago Federal Reserve reported its National Activity Index (CFNAI) rose for a second consecutive month in June to a record high.  The CFNAI gained 0.61 points to 4.11 showing that economic activity continued to recover after the initial rebound from the shutdown low in April.  The increase in June was led by stronger production and employment-related indicators.  Of the 85 individual indicators, 54 made positive contributions to the index.  As a result the Diffusion Index spiked 0.45 point, the most since August 1980.  The three-month average of the CFNAI also improved but remained in deep negative territory at -3.49—its lowest reading since 1965.

International Economic News: Canada’s AAA rating and stable outlook was confirmed by S&P Global Ratings, which cited the country’s “ample” fiscal and monetary buffer and its diversified economy.  S&P analyst Julia L Smith wrote in a note, “Canada’s public finances were well positioned entering the pandemic to enable a strong policy response to contain its negative impact without weakening sovereign creditworthiness.”  Furthermore, S&P analysts expect Canada’s economy to return to growth next year, writing  “We expect the Canadian economy to recover in 2021, which will partially compensate for the loss of output this year, and continued GDP growth thereafter.”

Retail sales and services in the United Kingdom rebounded more than expected according to data from the Office for National Statistics.  Sales in England, Scotland, and Wales climbed 13.9% in June compared with the previous month.  The increase was much stronger than the 8% expected by economists.  Furthermore, market research company IHS/Markit reported its flash purchasing managers’ services index rose to 56.6 in July, from 47.1 the previous month.  The reading, well above the 50-mark that represent a majority of businesses reporting an increase in activity, was its highest since 2015.  The services sector accounts for 80 per cent of the UK economy.

On Europe’s mainland, business activity in the Eurozone continued to recover.  IHS reported service sector businesses across the Eurozone reported a substantial strengthening in July.  Its flash purchasing managers’ index rose to 55.1 from 48.3 in June.  The result exceeded the expectations of economists who had forecast a reading of 51.  The index for manufacturing rose from 47.4 in June to 51.1 in July, and the composite PMI, an average of the two sectors, improved from 48.5 in the previous month to 54.8, well above the 51.1 forecast by analysts. “ Companies across the euro area reported an encouraging start to the third quarter, with output growing at the fastest rate in just over two years in July as lockdowns continued to ease and economies reopened,” said Chris Williamson, chief business economist at IHS Markit.  “Demand also showed signs of reviving, helping curb the pace of job losses.”

China has started to ease up on the emergency monetary measures it used to support its economy in response to the coronavirus outbreak, according to analysts.  On Monday, the People’s Bank of China (PBOC) announced that it would leave its benchmark lending rate unchanged – the third month in a row that it has not changed the loan prime rate.  Amid the coronavirus outbreak, the PBOC cut the loan prime rate twice this year, in February and April.  The Chinese central bank has also refrained from further cuts in banks’ reserve requirement ratio for two months, despite widespread market expectations for at least one more cut.  The combination of these has sparked concern that Beijing has begun to tighten up on its monetary policy easing after its economy grew a robust 3.2% in the second quarter.

Japan’s government raised it economic view for a second straight month in the July, though authorities conceded that a renewed spike in coronavirus cases in many parts of the world may weigh on that outlook.  The government described the world's third-largest economy as "showing signs of picking up" from the COVID-19-induced recession.  Japan's economy is in the grip of its worst postwar recession as the health crisis takes a heavy toll on business and consumer activity.  Although the global economy has shown some signs of bottoming out recently, analysts say world demand for cars and other durable goods is unlikely to recover strongly given the resurgence of coronavirus cases in major economies. 

(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.)