Global Markets Reach New Highs
At the close of business last Friday, global equities established fresh records during the week following the US infrastructure bill progress and a relatively tame inflation report.
Treasuries continued to fluctuate as the yield on the 10-year note rose to 1.31% from 1.30% last week. The price of a barrel of West Texas Intermediate crude oil fell to $68.93 from $69.30 last week. Volatility, as measured by the Cboe Volatility Index (VIX), fell to 15.4 from 17.0.
There are a number of things on the horizon:
- whether it’s the beginning of tapering, or even just talking about tapering
- what seems to be the endemic nature of COVID-19
- tapering in the UK and the US, and China’s crackdown
We are into a little more tricky period of time where I think that high-quality growth will win out. Secular, rather than cyclical growth probably works from here over the next eighteen months.
We’re running into a period of slower growth with fewer stimulus cheques, and people have to start coming back into the labour market; we’ll see how that transition goes. I believe the supply chain worries will ease.
A report by the United Nations’ climate panel warns that limiting global warming to close to 1.5 degrees Celsius or even 2 degrees Celsius above pre-industrial levels “will be beyond reach” in the next two decades without immediate, rapid and large-scale reductions in greenhouse gas emissions.
People who are fully vaccinated against COVID-19 are highly protected against severe infection, hospitalization and death caused by the virus. Nevertheless, coronavirus cases among the fully vaccinated–so-called breakthrough COVID cases–are still being seen among those who have had two doses.
CANADIAN ECONOMIC NEWS
Twitter is the latest company in Canada to require employees who choose to return to the workplace to be fully vaccinated against COVID-19. The social media company has about 150 employees in Canada.
Today, our federal government announced it will require its federal employees and those working in some federally regulated sectors, such as airlines and railways, to be fully vaccinated.
US ECONOMIC NEWS
US Senate passes infrastructure bill
The US Senate passed a $1 trillion infrastructure package, sending the provision to improve the nation’s roads, bridges and broadband to the House for approval.
The 2,700-page infrastructure bill now makes its way to the House, where it and a $3.5 billion budget resolution (focused on poverty, climate change and health care) are not likely to pass for months as Speaker Nancy Pelosi says she will not take up one plan without the other. If the House’s version of the infrastructure legislation includes material changes to the Senate’s, lawmakers from both chambers would then work together in a conference committee to reconcile their differences and produce a final bill. That bill would then return to each chamber for a vote before heading to President Joe Biden’s desk.
Fed inching closer to tapering
US Federal Reserve officials said that the US economy is growing rapidly and that while the labour market still has room for improvement, inflation is already at a level that could satisfy one leg of a key test for the beginning of interest rate hikes.
Atlanta Federal Reserve Bank President Raphael Bostic said he is eyeing the fourth quarter for the start of a bond-purchase taper, but is open to an even earlier start if the job market keeps up its recent pace of improvement. Dallas Federal Reserve President Robert Kaplan said that the central bank should begin tapering its monthly purchases of Treasury bonds and mortgage-backed securities in October.
Correspondingly, the US Department of Labor reported that the consumer price index rose 5.4% in July from a year earlier, in line with estimates and June’s growth. Excluding energy and food, the CPI rose by 0.3% last month, shy of economist s’ expectations of a 0.4% increase and well below June’s rise of 0.9%. Used car prices, which rose rapidly between April and June, gained just 0.2% in July after a climb of more than 10% in the prior month.
US job openings surged
The number of job openings in the US economy jumped to more than 10 million in June, the highest on record, the US Department of Labor Department disclosed. There were 10.1 million open jobs on the final day of June, the report said, up from 9.2 million in May. Economists polled by Dow Jones were expecting 9.1 million openings. The jump came as the quits rate increased while the layoffs and discharges rate was unchanged, reflecting increased bargaining power and employment options for workers.
By industry, leisure and hospitality showed one of the highest levels of job openings at more than 1.6 million. Healthcare and social assistance had 1.5 million openings. After dipping slightly in May, the share of people leaving their employer rose again in June, when another 3.9 million people quit their jobs, according to the latest Job Openings and Labor Turnover Survey. The number of people who quit their jobs in June made up 69% of total separations, which also includes layoffs, firings and retirement.
Long-term unemployment endures
About 3.4 million Americans were long-term unemployed in July, a reduction of about 560,000 from the prior month, according to the Bureau of Labor Statistics. However, the figures remain elevated relative to pre-pandemic levels. About two out of every five jobless individuals are long-term unemployed, meaning they’ve been out of work at least six months. Roughly 39% of all jobless workers have been out of work for twenty-seven weeks or longer, which is down from about 42% in June. The number of long-term unemployed remains 2.3 million higher than in February 2020.
EUROPEAN ECONOMIC NEWS
European shares hit record highs, recording their longest winning streak in two months on optimism of an upbeat earnings season, while a slowing increase in US inflation calmed nerves around monetary policy tapering.
Post-Brexit trade frictions have significantly altered freight traffic between Ireland and Britain and have sparked a steep rise in volumes to and from Ireland and other European Union members, the Irish Maritime Development Office detailed.
JAPAN, CHINA and EMERGING MARKETS ECONOMIC NEWS
China discusses monetary policy
China’s central bank said it would keep monetary policy flexible and appropriate to maintain stability as the pandemic persists and domestic economic recovery is uneven. In its second-quarter monetary policy implementation report, the People’s Bank of China said it would keep liquidity reasonably ample and step up support for technology innovation, small firms and the manufacturing sector.
China has tightened COVID-19 measures to combat an uptick in daily cases, a move that could inhibit the country’s economic growth and impact global growth.
China’s new bank loans fell more than expected in July to their lowest in nine months while broad credit growth hit a 17-month low, adding to market expectations that modest policy easing may be needed to underpin the country’s economic recovery.
Singapore’s government raised its official growth forecast for 2021 after the economy held up stronger than expected in the first half of the year as the domestic COVID-19 situation stabilizes. Singapore’s economy is expected to grow between 6% and 7% this year, the trade and industry ministry said, compared with the previous official projection range of 4% to 6%.