Markets Continue to Consolidate

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At the close of business last Friday, global equities again lost ground on the week, while the yield on the US 10-year Treasury note rose five basis points to 1.37%. The price of a barrel of West Texas Intermediate crude oil continued to advance, rising to $71.85 from $69.50 a week ago. Volatility, as measured by the Cboe Volatility Index (VIX), also rose this week, firming to 19 from 17.5 last Friday.


With dirty energy sources being phased out, US natural gas prices reached their highest level in over a decade this past week, on the heels of tight supply and growing demand. Price jumps in Europe were even more dramatic as mild winds reduced output from wind turbines amid lower-than-normal gas inventories.



In August, Canadian consumer prices rose at their fastest pace in eighteen years, jumping 4.1%. The news comes less than a week before Canada’s federal election, which finds Prime Minister Justin Trudeau’s Liberal Party locked in a tight race with the Conservative Party, headed by Erin O’Toole. We go to the polls on Monday. Please make sure to get out and vote.

The latest poling numbers suggest the Liberals and Conservatives are in a dead heat. The Liberals are polling at 30.8 per cent.The Conservatives saw their polling numbers increase 30.5 per cent. The NDP are polling at a steady 21.0 per cent. The People’s Party of Canada saw their polling numbers drop to 5.6 per cent. The party now sits below the Bloc Quebecois, which is polling at 6.5 per cent. The Greens are in sixth place, with 4.7 per cent support.



US August retail sales beat expectations
Economists had anticipated a sharp decline in August retail sales, but the data provided an upside surprise on Thursday, showing a rise of 0.7%. Stripping out auto sales, which have been held back by a shortage of semi-conductors, sales rose a robust 1.8%. Along with a pair of upbeat regional Federal Reserve Bank indices from New York and Philadelphia, the data help allay fears that the spread of the Delta variant of the coronavirus is taking a sharp toll on economic growth.

Meanwhile, the advance in US consumer prices levelled off in August as the Consumer Price Index rose 5.3% year over year, down from 5.4% in July. Core CPI, which excludes food and energy, rose 4.0%, down from 4.3%, a 30-year high, in July. Despite the modest slowdown in the pace of inflation and expectations that much of the recent advance is transitory, a survey by the Federal Reserve Bank of New York shows consumers expect inflation to rise 5.2% in the coming year.

This week, US Securities and Exchange Commission Chair Gary Gensler called for greater efficiency and transparency in the markets for US corporate, municipal and mortgage bonds. Gensler also warned the cryptocurrency market is rife with fraud, scams and abuse.



UK labour market bounces back
Payrolls in the United Kingdom exceeded their pre-pandemic level for the first time in August, as a record 241,000 workers were added, the Office of National Statistics reported this week. The ONS further reported that there are over one million unfilled jobs in the country, raising the spectre of a worker shortage as the economy reopens more fully. About 1.6 million Britons remain furloughed as a result of COVID-19 restrictions, but the government-sponsored furlough program is set to expire at the end of this month.

Also this week, the ONS reported that retail sales unexpectedly fell 0.9% in August, the fourth monthly decline in a row, while inflation rose to 3.2%, its highest level since 2012.



Growth slows in China
Furthering its regulatory crackdown, China announced plans to tighten the supervision of casino operators in Macao.

The pace of economic growth in China slowed in August, data this week show. Retail sales rose just 2.5% year over year, slower than the prior month’s 8.5% pace and well below estimates of a 6.3% advance. Industrial production missed estimates as well, rising 5.3% compared with August 2020, down from July’s 6.4% pace.

The spread of the Delta variant has forced several port closures in recent months, and continued restrictions have restrained economic activity.

The People’s Bank of China injected large amounts of liquidity into the Chinese banking system on Friday amid growing concerns over the fate of heavily indebted property developer Evergrande.

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