U.S. Markets: Most of the major U.S. benchmarks added to last week’s sharp gains, bolstered by positive news of a coronavirus vaccine candidate from Pfizer.  All of the major indexes touched all-time intraday highs in early trading Monday but surrendered much of their gains by midweek.  The Dow Jones Industrial Average and the smaller cap benchmarks performed the best, while value shares easily outperformed their growth counterparts.  The Dow Jones Industrial Average added over 1,100 points finishing the week at 29,480, a gain of 4.1%.  The technology-heavy NASDAQ Composite retraced some of last week’s surge and was the only U.S.equity index to finish down for the week at  0.6%.  By market cap, the large cap S&P 500 added 2.2%, while the mid cap S&P 400 and small cap Russell 2000 added 4.3% and 6.1%, respectively.

International Markets: Like the U.S., almost all major international equity markets finished the week in the green.  Canada’s TSX added 2.4%, while the United Kingdom’s FTSE 100 vaulted 6.9%.  On Europe’s mainland France’s CAC 40 surged 8.5%, while Germany’s DAX gained 4.8%.  In Asia, China’s Shanghai Composite ticked down -0.1% while Japan’s Nikkei rose 4.4%.  As grouped by Morgan Stanley Capital International, developed markets rallied 4.8% while emerging markets added 0.8%.

Commodities: Precious metals retreated in the face of the strength in equities markets.  Gold retraced most of last week’s gain falling -3.4% to $1886.20 per ounce.  Silver declined -3.5% to $24.77 per ounce.  Oil, on the other hand, had its second week of strong gains.  West Texas Intermediate crude oil surged 8.1% to $40.13 per barrel.  The industrial metal copper, viewed by some analysts as a barometer of world economic health due to its wide variety of uses, finished the week up 0.8%.

U.S. Economic News: The number of Americans seeking first-time unemployment benefits fell by 48,000 to a pandemic low of 709,000.  The reading suggests the record outbreak in coronavirus cases has not made a significant dent in the labor market.  At least not yet.  The decline was bigger than expected—economists had forecast a decline to 731,000.  Continuing claims, which counts the number of Americans already collecting benefits, declined by 436,000 to a seasonally-adjusted 6.79 million.  Robert Frick, corporate economist at Navy Federal Credit Union stated, “This is the fourth week in a row unemployment claims have fallen, and while the pace is slow, we are seeing the jobs market clawing its way back.”

The Bureau of Labor Statistics reported its Job Opening and Labor Turnover Survey (JOLTS) report showed the number of job openings increased to 6.4 million in September from 6.35 million the prior month.  While job openings are back to pre-crisis levels, the U.S. economy is still missing some 10 million jobs that existed before the pandemic struck in March.  The pace of hiring also appears to have returned to normal, but even if that’s the case, it will take many months to recover most of the lost jobs.  Some 5.87 million people were hired in September, down a bit from 5.95 million in August.  Hiring had jumped to as high as 7.2 million in May when the economy reopened.

Prices at the consumer level remained unchanged in October according to the Bureau of Labor Statistics (BLS).  Economists had expected a 0.1% increase.  The cost of living had risen sharply over a fourth-month span from June to September, but it seems to have been mostly just “catch-up” after a steep decline in prices early in the coronavirus pandemic.  On an annual basis, the yearly rate of inflation slowed to 1.2% in October from 1.4% in the prior month.  Before the pandemic, consumer inflation was running at a much higher 2.3% annual clip.  In the report, the cost of staples such as groceries and electricity rose slightly in October, but those increases were offset by price declines for gasoline, car insurance, clothing, home furnishings and medical care.  Core CPI, which excludes the often-volatile food and energy categories, was also unchanged in October.  Over the past year the core rate of consumer inflation has risen 1.6%, a tick down from the previous month.

At the producer level, prices rose again last month but analysts noted little evidence of widespread inflation bubbling up in the economy.  The BLS reported its Producer Price Index (PPI) advanced 0.3% in October—its sixth consecutive increase since the economy reopened in May.  Economists had expected a 0.2% increase.  The increase in producer prices over the past year ticked up to 0.5% from 0.4%.  The index had been growing at a 2% annual pace in January, shortly before the pandemic took hold.  In the report, the rising cost of food such as vegetables, meat, chicken and eggs was the biggest contributor to the increase in wholesale prices last month, the government said.  They accounted for about three-fourths of the 0.5% increase in the cost of goods.  The cost of services advanced a smaller 0.2% and was largely centered on transportation.  Core PPI increased 0.2% last month.  The core rate has risen just 0.8% in the past 12 months.

The National Federation of Independent Business (NFIB) reported ¬its Small Business Optimism Index remained unchanged at 104.0 in October, but uncertainty about future business conditions hit its highest level since November 2016.  The cautious level of optimism was evident in the index’s subcomponents, with four improving, five declining, and one remaining unchanged.  Profits improved again in October and many small businesses expect sales to pick up in the next several months.  Some companies are also restocking goods, hiring more workers and even planning to increase investment.  The coronavirus still poses the biggest risk given the record increase in cases that could trigger more government limits on business.  Even a partial reinstatement of restrictions could be harmful, especially since the federal program that provided struggling small businesses with a financial lifeline came to an end in July.

International Economic News: The second-in-command at the Bank of Canada warned that economic “scars” from the COVID-19 pandemic could become permanent without a concerted effort from all Canadians.  Senior Deputy Governor Carolyn Wilkins stated in a webcast speech the economic recovery will likely be uneven and it must be recognized that some people and jobs will be left behind, despite positive outcomes such as the accelerated transition to digitization as a source of improved competitiveness.  “In our most recent projection, this adds up to a situation where Canada is likely to exit the pandemic with a lower profile for potential output,” she said.  “That means, in regular people terms, a significantly diminished ability to generate the goods and services and incomes on a sustainable basis and any of those scars could become permanent without deliberate actions from all of us.”

Across the Atlantic, the United Kingdom’s economy grew by a record 15.5% in the third quarter, but analysts warn a second lockdown would derail the recovery.  Economists had expected a 15.8% quarter-on-quarter expansion in GDP in the three months to September.  The rebound followed an unprecedented 19.8% plunge in the previous quarter as a nationwide lockdown crippled economic activity.  The third-quarter bounce marks the U.K.’s sharpest quarterly expansion since records began in 1955, but GDP is still 9.7% below where it was at the end of 2019, the Office for National Statistics said.

On Europe’s mainland, France’s economic activity is markedly lower than normal this month after the country entered a coronavirus lockdown for the second time this year, the French central bank said.  The government imposed the new lockdown on Oct. 30 to rein in a surge in new cases, although the restrictions were softer than the first time to limit the impact to the euro zone’s second-biggest economy.  The Bank of France said economic activity was expected to be reduced by 12% of normal levels as a result, worse than the 4% drop in October but far better than the 31% loss seen in April during one of the strictest lockdowns in Europe.  Bank of France Governor Francois Villeroy de Galhau stated that for the whole of 2020, he is expecting an economic contraction of “between -9% and -10%.”

Germany’s Economy Ministry stated the country’s economic recovery continued in October, but has slowed since August.  Like France, Germany’s Economy Ministry said in its monthly report that the restrictions imposed from the start of November which forced restaurants, bars and entertainment venues such as cinemas and theaters to close meant consumption was taking a hit.  German Health Minister Jens Spahn said it was too early to say whether the restrictions would be extended beyond November, as the number of new daily coronavirus cases in Germany hit a record of 23,542.  The German government’s council of economic advisers said it expected Europe’s largest economy to shrink less than initially feared this year thanks to a strong summer, but a second wave of the COVID-19 pandemic was clouding the growth outlook for 2021.

U.S. President Donald Trump issued an executive order barring Americans from investing in a list of companies with ties to the Chinese military.  The list includes prominent Chinese technology, manufacturing and infrastructure companies, such as China Mobile Communications Group, China Telecommunications Corporation, Huawei, Sinochem Group, Hangzhou Hikvision Digital Technology, China Railway Construction Corporation, Inspur Group and Aviation Industry Corporation of China.  Mr. Trump said American investment in these companies was helping China fund its military ambitions.  Mr. Trump said China was “increasingly exploiting United States capital to resource and to enable the development and modernization of its military, intelligence, and other security apparatuses.”

Japan’s sharp economic rebound in the last quarter likely recovered only around half the growth lost during the initial stages of the pandemic, official data is expected to show next week, with weak business investment contributing to slowing momentum going forward.  Economists see gross domestic product jumping at an annualized pace of 18.9% in the three months through September, helped by improved trade with the United States and China, a rebound in the auto industry and the biggest increase in household spending in nearly 20 years.  Economist Yoshimasa Maruyama at SMBC Nikko Securities stated that would be the biggest growth rate since 1968, but he estimated it would take three years for GDP to regain its peak before COVID-19 and the 2019 sales tax hike.

(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, CNBC, FactSet.)