At the close of business last Friday, global equities advanced to record territory from the previous week, producing gains for the seventh consecutive month.

The yield on the benchmark 10-year US Treasury note remained fairly flat at 1.33%, while the price of a barrel of West Texas Intermediate crude oil rose to $69.68 from $69.00 following the disruptive impact of Hurricane Ida. Volatility, as measured by the Cboe Volatility Index (VIX), held steady at 16.6.

 

MACRO NEWS

Stocks remained positive in August
The market wrapped up its seventh consecutive month of gains in August. The S&P 500 Index rose 2.9% last month, the Nasdaq Composite climbed about 4% for its third winning month in a row while the Dow Jones Industrial Average added 1.2%. The FTSE 100 Index was up 1.2% in August for its best monthly performance since April.

The S&P 500 experienced its longest winning streak since a 10-month run ended in December 2017. August was also the benchmark’s ninth positive month in the last ten. The index has notched 53 record closes thus far in 2021. Ten out of eleven S&P 500 sectors rose in August, led by financials, with a gain of 5%, and all sectors are positive for the year.

September is traditionally the toughest month for stocks: According to CFRA, since 1945, the S&P 500 has been down an average of 0.56%, though it has risen three out of the past four years.

New coronavirus strain a concern
The World Health Organization is monitoring a new coronavirus variant called “Mu,” which the agency says has the potential to break through the immunity provided by a previous COVID-19 infection or vaccination. The new variant was first identified in Colombia, but has since been detected in at least 39 countries. The agency is monitoring four variants of concern, including the Delta, which was first detected in India and is currently the most prevalent circulating in the United States; the Alpha, first detected in the UK; the Beta, first detected in South Africa and the Gamma, first detected in Brazil. A variant of concern is generally defined as a mutated strain that is more contagious, more deadly or more resistant to current vaccines and treatments.

 

CANADIAN ECONOMIC NEWS

Canada posts surprising contraction
Canada’s economy unexpectedly shrank in the second quarter and likely had far less momentum than had been expected heading into the summer. The economy shrank 1.1% in the second quarter on an annualized basis, missing analysts’ expectations of a gain of 2.5%. With the July decline, economic activity remains about 2% below pre-pandemic levels. The contraction could have political implications.

Better news is that our manufacturing activity grew in August at the fastest pace in four months as new orders climbed and firms scrambled to reduce the risk of depleting stock.

Federal election polls
We go to the polls on September 20th with Prime Minister Justin Trudeau’s Liberals in a tight race with the Conservatives, who are led by Erin O’Toole. The Conservatives with 34 percent have a narrow lead over the Liberals at 31.3 percent. The New Democrats with 20 percent have made gains but are still well back in third place, while the Bloc Québécois is still in a position to win most of the seats it won in 2019. The Greens are in fifth place behind the People’s Party.

 

US ECONOMIC NEWS

US unemployment and layoffs dip but jobs disappoint
Initial unemployment claims declined last week to their lowest levels since March 2020, the US Department of Labor Department reported. First-time jobless claims totalled 340,000 for the week of August 28th compared with the 345,000 Dow Jones estimate. That is the lowest level for initial claims since 14 March 2020, when first-time claims totalled 256,000 just before the COVID-19 pandemic caused a historic spike.

Layoffs also dropped to a 24-year low in August, but job creation was a big disappointment for the month, with the economy adding just 235,000 positions. Economists surveyed by Dow Jones had been looking for 720,000 new hires. The unemployment rate dropped to 5.2% from 5.4% which was in line with estimates. A large employment gap remains despite jobless filings dropping to their lowest levels since the early days of the pandemic.

 

EUROPEAN ECONOMIC NEWS

Germany’s annual consumer price inflation accelerated to hit a fresh 13-year high in August, coming in at 3.4%. This underlines growing price pressures as Europe’s largest economy recovers from the pandemic and companies struggle with supply shortages. The August reading was the highest since July 2008, when the synchronized inflation rate also hit 3.4%.

 

JAPAN, CHINA AND EMERGING MARKETS ECONOMIC NEWS

Children and teens under 18 years old in China will be allowed a maximum of three hours per week to play online video games, according to new rules published by China’s National Press and Publication Administration. The agency portrayed the rules as a way to safeguard children’s physical and mental health.