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U.S. Markets:  The major U.S. indexes retreated over the holiday-shortened week; the small cap Russell 2000 index fared the worst among the indexes following two weeks of outperformance.  The Dow Jones Industrial Average shed 761 points to finish the week at 34,608—a decline of -2.2%.  The technology-heavy Nasdaq Composite gave up 248 points to 15,115—a decline of -1.6%.  By market cap, the large cap S&P 500 retreated -1.7%, while the mid cap S&P 400 and Russell 2000 declined ‑2.7% and -2.8%, respectively.

International MarketsExcept in the Far East, international markets were mostly down for the week.  Canada’s TSX retraced last week’s gain ending down -0.9%.  In Europe, the United Kingdom’s FTSE 100 retreated -1.5%, France’s CAC 40 shed -0.4% and Germany’s DAX declined -1.5%.  However, in Asia, China’s Shanghai Composite surged 3.4% and Japan’s Nikkei vaulted 4.3%.  As grouped by Morgan Stanley Capital International, developed markets ended down ‑1.1% and emerging markets gave up -1.2%.

Commodities:  Precious metals declined last week with Gold giving up -2.3% to $1792.10 per ounce and Silver losing ‑3.6% to $23.90.  Energy finished the week up.  West Texas Intermediate crude oil finished the week up 0.6% to $69.72 per barrel.  Perhaps the one bright spot in last week’s metals trading was the industrial metal copper, viewed by some analysts as a barometer of world economic health due to its wide variety of uses, which finished the week up 2.7%.

U.S. Economic News:  The number of Americans filing for first-time unemployment benefits fell sharply this week to its lowest level since the pandemic began.  The Labor Department reported initial jobless claims fell by 35,000 to 310,000.  Economists had forecast new claims would total 335,000.  Claims have fallen steadily since mid-July.  Analysts state the reading is a sign businesses remain confident about the future.  Meanwhile, the number of people already collecting benefits, known as continuing claims, slid by 22,000 to 2.78 million.  That number is also at a pandemic-era low.

The number of job openings in the U.S. hit another record high in July—the fifth consecutive all-time high.  The Labor Department reported job openings hit a record 10.9 million in July.  Economists had forecast 10.1 million openings.  For the first time in history, the ratio of people unemployed to job openings fell to less than 0.8:1.  Not all sectors were impacted equally. Openings fell in construction, trade, transportation and utilities.  Of note, the “quits rate”, rumored to be the Federal Reserve’s preferred measure of the labor market as it assumes one would only quit a job in favor of a more lucrative one, ticked up to 3.1%.  Labor market analysts don’t expect the demand in hiring to slow anytime soon.  Lydia Boussour, economist at Oxford Economics wrote in a note to clients, “Given red-hot labor demand and rising wage growth, the jobs recovery seems unlikely to go into reverse.  We expect the pace of hiring will reaccelerate modestly this fall as the delta coronavirus wave recedes and labor constraints start to ease.”

Prices at the producer level rose again in August following a big jump in July.  The Bureau of Labor Statistics reported the U.S. producer price index rose 0.7% in August.  Economists had expected a 0.6% advance.  From the same period last year, producer prices were up 8.3%--its largest gain since the data was first collected in 2010.  Core prices, which exclude food and energy, were up 0.3%.  Inflation remains well above the Federal Reserve’s 2% annual target.  Producers are still struggling with shortages, bottlenecks and transportation difficulties in the wake of the coronavirus pandemic.

The Federal Reserve’s ‘Beige Book’—a collection of anecdotal economic reports from each of its member banks—reported economic growth is slowing as the ‘delta variant’ hits tourism and restaurants.  The worsening situation surrounding the COVID-19 pandemic prompted a pullback in dining out and travel, the Fed reported.  Notably, businesses reported they weren’t encountering difficulty in raising prices to consumers to account for the higher costs they were incurring.  Some businesses suggested Americans could see ‘significant hikes’ in prices in the coming months.  Businesses remained optimistic, although concerned, about continuing supply disruptions and labor shortages, especially in the West and Midwest.

International Economic News:  The Bank of Canada kept its key interest rate target steady this week as it warned a fourth wave of the pandemic and its ancillary effects could weigh on the economic recovery.  The central bank held its target for the overnight rate at 0.25%, what it calls the effective lower bound, and said it will also maintain its quantitative easing program by buying bonds at a target pace of $2 billion per week.  "The governing council judges that the Canadian economy still has considerable excess capacity, and that the recovery continues to require extraordinary monetary policy support," the bank said in its decision.  Last week Statistics Canada reported that the country's gross domestic product declined in the second quarter.

Across the Atlantic, the United Kingdom’s Office for National Statistics (ONS) reported Britain’s economic recovery almost stalled in July despite the removal of pandemic restrictions.  The ONS said GDP grew by just 0.1% in July from a month earlier.  GDP was lower than the 0.6% growth forecast by economists, and a sharp slowdown compared with June when the economy grew by 1%.  Rising costs and shortages of raw materials triggered a fall in construction, while manufacturing remained broadly flat as firms struggled to fill staff vacancies in July amid a lack of suitable applicants and a reduced number of EU workers.

On Europe’s mainland, French finance chief Bruno Le Maire has said he plans to tackle France’s mountain of COVID-19 debt by relying on investment to fuel stronger economic growth, rather than raising taxes.  Le Maire said the 2022 budget will deliver on promises to cut corporate tax -- which stood at more than 33% for some companies when Emmanuel Macron took office in 2017 -- to 25% for all firms.  It will also continue the phasing out of residency tax.  “This budget is completely coherent with the three strategic choices we have defended from the start of the presidency: cutting taxes, supporting investment and innovation, and supporting French people to work,” Le Maire said.

Investor confidence in the German economy declined for a fourth consecutive month in September after global supply disruptions and infection rates surged threatening its recovery.  The ZEW Institute’s gauge of economic expectations fell 13.9 points to 26.5 in September—its lowest level in a year and a half.  Christian Lips, chief economist at NordLB wrote in a note, “The recovery could have been significantly stronger in the third quarter if it weren’t for the supply shortages -- now we will need to settle with a somewhat slower pace of growth.”  The situation is aggravated by rising coronavirus cases across the world.  Outbreaks in Asia have triggered strict curbs over the past weeks, amplifying material shortages and delivery delays to and from Germany that were once considered temporary.

In Asia, China’s central bank policymakers pushed back this week on expectations they would take aggressive measures to boost economic growth.  “China’s monetary policy remains within a normal range,” said Pan Gongsheng, a vice governor at the People’s Bank of China and head of the State Administration of Foreign Exchange.  He added that China would not embark on large-scale, flood-like stimulus.  “Current conditions may not require as much liquidity as before to keep money market interest rates operating stably,” Sun Guofeng, head of the central bank’s monetary policy said.  Nomura’s chief China economist, Ting Lu, noted that the yield on China’s 10-year government bond had ticked higher to 2.87% from 2.85% as markets interpreted additional policymaker comments “as a signal of less monetary easing.”

Japan's economy grew faster than the initially estimated in the second quarter, helped by solid capital expenditure.  Japan’s Cabinet Office reported its revised GDP showed the economy grew by an annualized 1.9% beating the median forecast of 1.6%.  The upward revision was caused by better-than-initially-estimated business spending, as a brisk global economic recovery powered capital expenditure and factory output, which more than offset weak service-sector activity.  However, some analysts see Japan’s recovery taking longer than expected.  Takeshi Minami, chief economist at Norinchukin Research Institute wrote, “Japan's recovery is lagging behind other advanced economies. As such, the economy's fully-fledged recovery needs to wait at least until early next year.

(Sources:  All index- and returns-data from Yahoo Finance; news from Reuters, Barron’s, Wall St. Journal,,,,,,,, Eurostat, Statistics Canada, Yahoo! Finance,,,, BBC,,,, FactSet, WE Sherman.)