U.S. and International Equities
Emerging Markets Rebound
The major markets finished mostly higher building on last week’s gains. Emerging markets, as represented by the MSCI EM Index, outperformed the major market indexes for the second week in a row, as traders took advantage of marked-down names as the Chinese government continues its regulatory crackdown on its companies.
Real Estate Constructs Itself Ahead of the Pack
Real estate was one of the worst performers last year given the effects of COVID-19 on the demand for commercial real estate. With the economic reopening along with a low 10-year Treasury bond yield, the real estate sector has surpassed the energy sector as the top performing sector in 2021.
Fixed Income and Commodities Recap
Bonds and Natural Gas Rebound
The bellwether Bloomberg Barclays Aggregate Bond Index rebounded this week on the weaker than expected August unemployment report. High yield bonds, represented by the Bloomberg Barclays High Yield Index, were again a bright spot in fixed income this week despite further evidence of slowing economic growth. Natural gas rallied this week as Hurricane Ida caused production plant shutdowns, limiting future supply.
Economic Weekly Roundup
Delta Variant Clouds Near-Term Outlook
The Institute for Supply Management (ISM) manufacturing index exceeded consensus expectations, driven by increases in orders, production, and inventories. However, the increases were partially off by a decline in the employment component, which reached a nine-month low. In addition, the global manufacturing purchasing managers’ index (PMI) declined for a third consecutive month in August. The report indicated that suppliers’ delivery times as well as input prices have stopped rising, albeit they remain at high levels.
According to the U.S. Bureau of Labor Statistics, the US economy gained over 230,000 jobs in August. This came in well short of the Bloomberg survey estimate. August’s unemployment rate declined to 5.2%, which was in line with expectations. In addition, the labor force participation rate remained unchained at over 61.7%. The early market reaction indicates that market participants believe today’s report will delay the Federal Reserve’s (Fed) tapering efforts.
Other highlights from this week’s economic calendar include:
- Both initial and continuing claims for unemployment insurance reached post-pandemic lows in this week’s employment report.
- China’s official August manufacturing purchasing managers’ index (PMI) missed expectations while the services sector fell into contraction for the first time since February 2020.
The following economic data is slated to be released during the holiday-shortened week ahead:
- Wednesday: July Job Openings and Labor Turnover Survey (JOLTS), Federal Reserve Beige Book, July Consumer Credit
- Thursday: Weekly initial and continuing unemployment claims
- Friday: August Producer Price Index, July wholesale inventories
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