Stocks drifted higher through much of the week. Manufacturing signals remained encouraging, with July factory orders rising more than expected and the Institute for Supply Management’s gauge of factory activity surprising on the upside to reach its highest level since early 2019. The Institute’s services sector gauge also came in better than expected.

Labor market data was also encouraging. A daunting 1.2 million Americans filed weekly jobless claims, but it broke a string of two weekly increases and marked the lowest level since the onslaught of the pandemic and business closings in early March. On Wednesday, ADP announced a much smaller-than-expected rise in its tally of July private payrolls, but the Labor Department’s official July count surprised on the upside when it was released Friday — employers added 1.76 million jobs in the month, fostering a further decline in the unemployment rate, from 11.1 to 10.2 percent. The underlying data were perhaps less encouraging, with much of the payroll increase due to the timing of a seasonal adjustment to educational hiring. The labor force participation rate also dropped slightly.

The yield on the benchmark 10-year U.S. Treasury note touched a new five-month low on Thursday before increasing on Friday following the jobs report, leaving it modestly higher for the week.

European stocks rose last week on signs that an economic recovery may be gaining traction there and on hopes for more U.S. stimulus. However, escalating tensions between the U.S. and China and fears that Europe could suffer a resurgence of coronavirus cases curbed equity market gains. In local currency terms, the pan-European STOXX Europe 600 ended the week 2.03 percent higher, Germany’s Xetra DAX rose 2.94 percent, France’s CAC 40 gained 2.21 percent, Italy’s FTSE MIB climbed 2.22 percent, and the UK’s FTSE 100 advanced 2.28 percent.

Mainland Chinese markets rallied last week after data lifted confidence in the economic recovery. The large-cap CSI 300 and benchmark Shanghai Composite each posted solid gains, even after declining on Friday on news that President Trump tightened restrictions on Chinese social media networks TikTok and WeChat in the U.S. In another sign of the growing tech rift between the U.S. and China, San Jose-based video conferencing company Zoom, which gained popularity during the pandemic, said that it would halt direct sales to China and only provide video conferencing services through third-party partners. Elsewhere in Asia, following a steep decline at the end of July, Japanese stocks rallied in the first week of August. The Nikkei 225 advanced nearly 3 percent last week.

Source: "The Madison Weekly Market Wrap", August 30, 2020, Volume 7, Issue 35.