Investors Group Weekly Market Commentary – September 10, 2010
Jobs reports spark late-week rally
Statistics Canada released employment numbers Friday which showed employment rose by 35,800 jobs in August, beating expectations. The unemployment rate rose slightly to 8.1% due to more people joining the ranks of those actively seeking employment which is a positive. The Canadian market rose on Friday’s news, but was flat for the week. In an upbeat economic report, U.S. jobless claims fell 27,000 this week, much more steeply than consensus projections which called for a 2,000 reduction and the lowest level in two months. However, the unemployment rate is still high at 9.6%, and total jobless number hovers around the 450,000 mark. In a healthy economy, the number of unemployed typically sits under 400,000.
Additionally, big export gains in the U.S. also bolstered stocks and sent many global markets into higher territory on the week. The trade deficit narrowed in July, and exports are at their highest level in two years.
In a vote of confidence for the Canadian economy, and as expected, the Bank of Canada raised interest rates by 25 basis points, to 1% this week. Thursday’s rate hike is the Bank’s third increase in four months and reflects support for the underlying strength of Canadian economic fundamentals.
In its statement, the Bank outlined that financial conditions remain exceptionally stimulative, and that economic conditions, despite a softening in economic growth rate to 2% for the second quarter of this year, remain sound.
Markets have rallied since the start of September on more positive economic news, and next week’s consumer spending and sentiment reports will show whether the increasing optimism is occurring at the retail consumer level.
