U.S. Markets: Most of the major U.S. benchmarks reached new record highs this week on optimism for a coronavirus vaccine and diminishing political uncertainty surrounding the presidential election.  The Dow Jones Industrial Average briefly crossed the 30,000-level before ending the week at 29,910 – nonetheless, a gain of 2.2%.  The technology-heavy Nasdaq Composite finished the week up 3.0%.  By market cap, the large cap S&P 500 added 2.3%, while the mid cap S&P 400 and small cap Russell 2000 rose 2.7% and 3.9%, respectively.

International Markets: International markets also marched higher with almost all tacking on a fourth consecutive week of gains.  Canada’s TSX rose 2.2% and the United Kingdom’s FTSE 100 added 0.3%.  On Europe’s mainland, France’s CAC 40 and Germany’s DAX rose 1.9% and 1.5%, respectively.  In Asia, China’s Shanghai Composite finished the week up 0.9%, while Japan’s Nikkei surged 4.4%.  As grouped by Morgan Stanley Capital International, developed markets rose 1.9% and emerging markets finished up 2.0%.

Commodities: Precious metals continued to sell-off in the face of strength in world equities markets.  Gold retreated for a third consecutive week declined -4.5% to $1788.10 per ounce.  Similarly, Silver declined -7.1% to $22.64 per ounce.  Oil continued its rally adding over 7.3% finishing the week at $45.53 per barrel for West Texas Intermediate crude.  The industrial metal copper, viewed by some analysts as a barometer of world economic health due to its wide variety of uses, rose for a fourth consecutive week closing up 3.8%.

U.S. Economic News: The number of Americans seeking first-time unemployment benefits hit a 5-week high as a resurgence of coronavirus cases triggered more layoffs.  The Labor Department reported initial jobless claims increased by a seasonally-adjusted 30,000 to 778,000 last week.  Economists had forecast initial jobless claims to total 720,000.  It’s the first time new jobless claims have risen two consecutive weeks since July.  On the other hand, continuing claims, which count the number of people already receiving benefits, declined by 299,000 to a seasonally-adjusted 6.07 million.  That number is at a new pandemic low.  

The cost of buying a home rose sharply again in September and hit its highest level in six years, according to S&P CoreLogic.  S&P reported its Case-Shiller 20-city home price index rose at a 6.6% annual pace in October, up 1.3% from the prior month.  Wall Street economists had forecast a 5.4% increase.  A broader measure by Case-Shiller that covers the entire country showed a similarly large 7.0% increase in home prices over the past year, marking the fastest 12-month gain since 2014.  On a monthly basis, the Case-Shiller 20-city index rose 1.2% in September.  Prices rose in all of the cities tracked by Case-Shiller with the biggest increases taking place in Phoenix, Seattle and San Diego.  

Confidence among the nation’s consumers declined in November following a resurgence in coronavirus cases that spurred some cities and states to reimpose restrictions.  The Conference Board reported its index of consumer confidence slipped to 96.1 this month from a revised 101.4 in October.  Economists had forecast a decline to 97.3.  Confidence remains far below pre-pandemic levels—the index stood at 132.6 before the viral outbreak in February.  The reading does not bode well for consumer expectations going into the new year.  Lynn Franco, senior director of economic indicators at the board stated, “Heading into 2021, consumers do not foresee the economy, or the labor market, gaining strength.”

The Chicago Fed reported its National Activity Index rose last month, following three consecutive declines, pointing to stronger growth through the end of the year.  The Index rose to 0.83 in October from a revised 0.32 the prior month, and was its first gain in four months.  The index is a weighted average of 85 economic indicators.  In the details of the report, production-related indicators added 0.36 to the index in October after subtracting 0.10 in the prior month, while employment-related indicators contributed 0.39 in October, up slightly from 0.30 in September.  Overall, 61 of the 85 indicators made positive contributions to the index and 54 showed improvement from the prior month.

Research firm IHS Markit reported both of its Purchasing Managers’ Indexes (PMIs) for the services and manufacturing sides of the economy rose in November to a five-year high, despite the record increase in coronavirus cases.  The flash index for the vast services sector of the U.S. economy rose 1.7 points to 57.7 in November—its biggest increase since March 2015.  The index for the smaller manufacturing sector climbed 3.3 points to 56.7.  Chris Williamson, chief business economist at IHS Markit stated, “Expectations about the year ahead have surged to the most optimistic for over six years, reflecting the combination of a post-election lift to confidence and encouraging news that vaccines may allow a return to more normal business conditions in the not too distant future.”

Orders for durable goods, goods expected to last at least 3 years, jumped last month as manufacturers lead the U.S. economic recovery.  The Commerce Department reported durable goods orders advanced 1.3% in October.  Economists had expected just a 0.5% increase.  However, analysts noted the surge in orders was driven primarily by defense spending.  If defense is excluded, orders still rose, but by a more modest 0.2%.  Core capital goods orders, a key measure of business investment, rose by 0.7% in October.  Despite the increase, analysts remain concerned about a resurgence in coronavirus cases.  Rubeela Farooqi, chief U.S. economist at High Frequency Economics wrote in a note to clients, “the manufacturing sector remains exposed to surging virus cases that could disrupt supply chains, weigh on demand and slow the pace of rebound going forward.”

International Economic News: Canada is set to reveal the breadth of the emergency spending it has made during the pandemic and lay the groundwork for future stimulus and social measures.  Canada did not release a budget for this fiscal year, which began in April, because of the economic uncertainty created by COVID-19.  However, in July it projected a C$343.2 billion ($263.8 billion) deficit, the largest since World War II.  The new fiscal document, dubbed the Fall Economic Statement, will be released this week and will include several scenarios for future spending and growth, and an update on this year’s deficit.  Notably, while much of the emphasis will be focused on support during the new surge in coronavirus cases, there will also be a “down payment” on a new national childcare plan.

Across the Atlantic, Bank of England Governor Andrew Bailey warned that a “No-Deal” Brexit would do more damage to the United Kingdom’s economy over the long run than the coronavirus pandemic.  "I think the long-term effects ... would be larger than the long-term effects of Covid," Bailey said this week in response to a question from a lawmaker on what would happen if the UK government does not complete a deal before the December 31 deadline.  The United Kingdom left the European Union in January.  But the £670 billion ($895 billion) trade relationship has been largely unaffected so far because of a transition period that expires at the end of this year.  Negotiators have been trying to hammer out a deal that will allow for tariff-free trade to continue, but progress has been slow.  The chief EU negotiator Michel Barnier has stated that "fundamental differences" still need to be resolved.

On Europe’s mainland, French President Emmanuel Macron stated France will start easing its COVID-19 lockdown this weekend so that by Christmas, shops, theaters and cinemas will reopen and people will be able to spend the holiday with their families.  In a televised address to the nation, Macron said the worst of the second wave of the coronavirus pandemic in France was over, but that restaurants, cafes and bars would have to stay shut until Jan. 20 to avoid triggering a third wave.  Positive trends including a decline in hospitalizations for COVID-19 infections, combined with pressure from business lobbies who say they are facing financial ruin, have led to calls to start loosening the lockdown as soon as possible.  Macron’s government has reiterated that French citizens should expect only a gradual reopening of the economy.

Germany’s Ifo Institute reported business morale fell for a second consecutive month in November, suggesting that Europe’s largest economy will shrink in the fourth quarter.  Ifo’s business climate index fell to 90.7 from a downwardly revised 92.5 in October.  The second drop followed five months of rises.  Ifo President Clemens Fuest remarked, “Business uncertainty has risen.  The second wave of the coronavirus has interrupted Germany’s economic recovery.”  The drop was mainly driven by companies’ considerably more pessimistic expectations for the next six months, but their view on the current situation was also somewhat worse.

In Asia, China’s premier Li Keqiang said he expects economic activity in the country to return to a reasonable range next year.  “China’s economy this year can achieve positive growth, and we expect next year (economic) operations can recover to a reasonable range,” Li stated in a news conference with leaders of six major international economic and financial organizations, including the World Bank and International Monetary Fund.  The world’s second-largest economy grew 0.7% in the first nine months of 2020 from a year earlier, while third-quarter GDP was up 4.9% year-on-year.

Japan’s government kept its economic assessment unchanged in its monthly report released this week, despite lowering its view on business investment.  “The Japanese economy is still in a severe situation due to the novel coronavirus, but it is showing movements of picking up,” said the November report compiled by the Cabinet Office.  However, the Cabinet Office downgraded its assessment of business investment for the first time since September, saying that the sector has been “decreasing recently”.  On a positive note, the government upgraded its assessment for industrial production saying the sector was “picking up”.  That number was backed by an increase in exports, mainly of automobiles, to other Asian countries and the United States.

(Sources:  All index- and returns-data from Yahoo Finance; news from Reuters, Barron’s, Wall St. Journal, Bloomberg.com, ft.com, guggenheimpartners.com, zerohedge.com, ritholtz.com, markit.com, financialpost.com, Eurostat, Statistics Canada, Yahoo! Finance, stocksandnews.com, marketwatch.com, wantchinatimes.com, BBC, 361capital.com, pensionpartners.com, cnbc.com, CNBC, FactSet.)