U.S. Markets: The benchmark S&P 500 index had its best weekly gain in three months, as investors seemed to grow more optimistic about a new round of fiscal stimulus as well as treatment options for the coronavirus.  The small-cap Russell 2000 surged over 6%, pulling it back out of correction territory and now within 10% of its 2018 peak.  All of the major U.S. benchmarks finished to the upside last week.  The Dow Jones Industrial Average added 904 points finishing at 28,587, a gain of 3.3%.  The technology-heavy NASDAQ Composite had its third consecutive week of gains, rising 4.6%.  The large cap S&P 500 added 3.8%, while the mid cap S&P 400 and small cap Russell 2000 rose 4.9% and 6.4%, respectively.

International Markets: Major international markets finished the week in the green.  Canada’s TSX added 2.2%, while the United Kingdom’s FTSE added 1.9%.  On Europe’s mainland France’s CAC 40 rose 2.5%, Germany’s DAX gained 2.9% and Italy’s Milan FTSE added 2.8%.  In Asia, China’s Shanghai Composite rose 1.7% and Japan’s Nikkei added 2.6%.  As grouped by Morgan Stanley Capital International, developed markets rose 2.8%, while emerging markets surged 4.2%.

Commodities: Gold rose for a second week, rising 1% to $1926.20 per ounce.  Silver rose for a second week as well finishing the week at $25.11 per ounce, a gain of 4.5%.  Oil retraced last week’s entire decline and then some.  West Texas Intermediate crude oil finished the week up 9.6% to $40.60 per barrel.  Copper, viewed by some analysts as a barometer of global economic health due to its wide variety of industrial uses, rose for a second week by adding 3.5%.

U.S. Economic News: The number of Americans seeking first-time unemployment benefits fell to a fresh pandemic low last week, although the rate of decline is slowing.  The Labor Department reported initial jobless claims declined by 9,000 to 840,000 last week.  Economists had expected new claims to fall to 820,000.  The slowing rate of decline led some analysts to suggest the labor market could be experiencing a setback amid another wave of corporate layoffs.  While new applications for unemployment benefits have gradually receded from a pandemic peak of 6.9 million in late March, the weekly total has fallen by less than 100,000 over the past month.  New jobless claims still remain about four times the pre-crisis average and are higher than any point during the financial crisis in 2007-2009.

Hiring and job openings in the private sector fell in August, a sign the labor market may be cooling as the economic recovery lost some of its momentum.  The Labor Department reported 5.9 million people were hired in August.  The number was basically unchanged from July, however analysts noted that number was inflated by the addition of nearly 250,000 temporary workers hired by the U.S. Census for its once-in-a-decade national survey.  Hiring in the private sector declined.  Furthermore, job openings slipped to 6.49 million from 6.7 million.  The number of jobs available had been running around 7 million a month before the coronavirus struck in March.  At the peak of the pandemic in March and April, the U.S. lost more than 24 million jobs.  So far it’s only recovered about half of them back.

Data from the Institute of Supply Management (ISM) showed America’s service sector continued its recovery in September.  ISM reported its services index rose 0.9 point to 57.8, the fourth consecutive month of improvement.  Employment also grew for the first time since the pandemic began.  The employment gauge climbed to 51.8% from 47.9%, suggesting service sector companies are adding more workers than they are letting go.  Strong gains in both the ISM service and manufacturing indexes suggest the economy continued to rebound following the economic shutdowns due to the coronavirus pandemic.  Overall, the improvement in the service side of the economy that employs eight in 10 Americans is good news.  Sixteen of the 17 industries tracked by the ISM services index expanded in September.

Federal Reserve Chairman Jerome Powell faced skepticism and opposition from other Fed board members regarding his guidance of markets about the future path of interest rates, minutes of September’s meeting released this week showed.  After their meeting, the Federal Open Market Committee released a statement vowing to keep interest rate near zero until inflation is on track to moderately exceed the central bank’s 2% target for some time.  Fed officials also released projections showing they expected rates would stay near zero until the end of 2023 at least.  There were two dissents from the new forward guidance from the ten voting members of the committee.  However, what wasn’t known until the minutes were published was that unease about the new policy was fairly broad among the remaining seven officials who didn’t vote.  According to the minutes, “several” of these Fed officials balked at the strategy, in part because the guidance could limit the central bank’s flexibility.  They also argued that by influencing the market’s view about the future path of short-term interest rates, “such guidance could contribute to a buildup of financial imbalances that would make it more difficult for the FOMC to achieve its objectives in the future.”

International Economic News: Canada added nearly 400,000 jobs in September, almost all of which were full-time positions, Statistics Canada reported.  September’s job gain means that Canada’s job market is now within 720,000 positions of where it was in February, before the outbreak of COVID in Canada.  March and April saw a cumulative record of three million jobs lost in Canada, before the numbers started to bounce back in May.  The economy has added jobs every month since.  The September surge means the economy has officially recovered more than three-quarters of the jobs it lost.  The gains were more than twice as many as economists had been expecting.  By comparison, the U.S. has only gained back a little more than half of the jobs it lost.

Across the Atlantic, the United Kingdom’s economic recovery slowed to 2.1% in August—far below forecasts of a 4.6% reading.  The figures added to mounting fears over the British economy, signaling that the bounce-back is losing steam and that a full recovery remains a distant prospect.  Output in August remained 9.2% below its pre-pandemic levels in February.  The unexpected slowdown in growth, reported by the Office for National Statistics, followed strong monthly expansions earlier in the summer.  James Smith, research director at the think-tank Resolution Foundation, said the “disappointing” figures confirmed that Britain had never been on course for a rapid V-shaped recovery.

On Europe’s mainland the French economy is expected to remain flat the last three months of the year, as uncertainty and the risk of lockdowns stifle investment and consumer spending.  Insee, the country’s statistics agency, downgraded its growth forecast to zero from 1% citing sentiment surveys “tinged with worry” about the near future.  Furthermore, sentiment within the services sector is particularly gloomy as households’ fear of unemployment is at levels not seen since the global financial crisis over a decade ago.

German Chancellor Angela Merkel warned of a new clampdown on German cities as the number of COVID cases surged again.  Ms. Merkel said Germany was facing a make-or-break moment, and what happened next would reflect “whether we can keep the pandemic under control…or whether that control will slip away from us”.  The comments were made as the chancellor spoke to 11 German mayors where it was agreed a further round of regulations would be imposed in areas where new infections exceed a threshold of 50 cases in a week per 100,000 population.  These would include tighter rules on mask-wearing, upper limits on the size of private gatherings and curbs on the sale of alcohol.

In Asia, the CEO of research firm China Beige Book stated China’s recovery isn’t as rosy as people think—even though the world’s second largest economy has bounced back from the coronavirus-induced slowdown.  Leland Miller, CEO of China Beige Book, pointed out China has indeed seen recovery but there is no improvement on a year-over-year basis.  Furthermore, he notes that the recovery is not evenly spread out across the entire economy.  “The recovery itself is actually two-pronged, and you see the larger cities, you see the coastal regions doing much, much better than the rest of the country,” he said.  “Beijing wants to advertise the Beijing, Shanghai, Guangdong type of recovery, but that’s not most of China,” he said, adding that the rest of China is seeing a far more muted recovery.

Japan raised its economic assessment in August for the first time in 15 months.  Japan’s Cabinet Office reported its coincident index of business conditions rose 1.1 points from July to 79.4—its third consecutive month of increases.  For 12 straight months through July, the government had rated the economy as “worsening,” the most pessimistic of its five expressions.  Last month, the office upgraded its assessment of the economy to “bottoming out”, its first upgrade of its evaluation since May of last year.  The latest outcome reflected the gradual resumption of economic activity throughout the country since the complete lifting of a state of emergency over the virus in late May.

(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.)