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In the Markets – Week-Ending November 4th

by Peter J. Creedon

Newsletter: In the Markets – Week-Ending November 4th
Crystal Brook Advisors
We Make Financial Planning Crystal Clear

United States: Voters in four states could decide to push the minimum wage to $12 or higher in four states: Arizona, Colorado, Maine and Washington. This increase in the pay floor could cause negative reactions among business owners, as this would increase costs and could potentially drive up unemployment. There are benefits to this increase as well, as it allows for workers to enjoy a marginal increase in their standard of living. (1) The rise in the participation rate over the past year has been driven by fewer workers exiting the labor force rather than more workers being drawn in. The labor market may not have that much more “room to run.” (2) Productivity growth rebounded to a 3.1 percent annualized pace in the third quarter, the best performance in two years. Nevertheless, productivity is flat over the past year and unit labor costs continue to edge up. (2)

Europe: The British government’s plan for leaving the European Union was thrown into uncertainty on Thursday after the High Court ruled that Parliament must give its approval before the process can begin. (3) Economies across Europe risk losing out if London’s position as a dominant financial center is threatened as a result of Brexit, a deputy governor of the Bank of England has warned. (4)

Asia: Embattled South Korean president Park Guen-hye has sacked the country’s prime minister amid an ongoing political scandal that threatens to topple her administration.Protesters have been calling for Park to resign since revelations last week that her confidante and spiritual adviser Choi Soon-sil may have seen secret government documents and influenced policy. (7) German firms are closely tied to Asia and are making good money in the region’s fast-growing economies. This year’s Asia-Pacific Conference of German Business is taking place Hong Kong. (8) Saudi Arabia, the world’s largest crude exporter, raised pricing for December sales of all oil grades to Asia as it tries to take advantage of a brief increase in demand for Middle Eastern crude. (5)

Latin America: The economies of Latin America and the Caribbean will likely contract for a second consecutive year, dragged down by South American countries that rely heavily on commodities and are more exposed to the slowdown in China, the World Bank said Tuesday. (1) Talks between President Nicolás Maduro and the opposition meant to defuse the country’s political crisis are off to a shaky start after the embattled leftist leader threatened to jail rivals calling for street protests. (1) The Brazilian government collected $15.8 billion in taxes and fines under an amnesty program offered to individuals and corporations with undeclared funds parked overseas. (1)

Monday 10/31
  • Output grew at an inflation-adjusted, annualized rate of 2.9 percent in the three months through September, driven in part by a jump in exports. (1)
  • U.S. stocks closed lower after drifting between slight gains and losses Monday, finishing October with a loss, as stronger-than-expected consumer spending data underlined the view that the economy is growing at a steady pace, while a drop in oil prices and election uncertainty weighed on the minds of investors. (9)
Tuesday 11/01
  • European shares fell back, erasing early gains, on Tuesday after surveys showed China’s factory activity rose to a two-year high last month. While the strong manufacturing data suggests China’s economy may be stabilizing, some worry the rebound in industrial output could signal risks of a bubble. (10)
  • Stock markets around the world and the U.S. dollar fell Wednesday as uncertainty over the U.S. presidential election kept investor sentiment in check. (10)
Wednesday 11/02
  • Credit Suisse reported a 19-fold drop in third-quarter profit compared to a year ago, with net revenues down 10 percent as the Swiss bank cited “challenging” market conditions and paid out deferred compensation. (10)
  • The Bank of England has opted to keep interest rates at a record low 0.25 percent after the economy showed unexpected resilience following the vote to leave the European Union. (10)
Thursday 11/03
  • European stocks suffered a late selloff but still managed to halt their longest losing streak in two years amid some better-than-expected earnings from the region’s banks, and as a U.K. ruling sparked optimism the nation’s split from the European Union won’t be as harsh as feared. (5)
  • European debt sold off on Thursday, pushing yields higher, after the Bank of England played down the chances of another interest-rate cut. (6)
Friday 11/04
  •  U.S. jobs continued to rise at a steady pace in October and wage gains accelerated, signs that the labor market and economy made steady progress at the start of the fourth quarter.(5)
  • Payrolls climbed by 161,000 last month following a 191,000 gain in September that was larger than previously estimated, a Labor Department report showed Friday. The median forecast in a Bloomberg survey called for 173,000. The jobless rate fell to 4.9 percent, while wages rose from a year earlier by the most since June 2009. (5)

Market Close

The S&P 500 index finished lower on Friday for the ninth-straight session, its longest stretch of declines since December 1980. Stocks rose after the open as investors digested a strong report on October jobs growth. But they soon erased their gains as uncertainty surrounding next week’s presidential election rattled markets. The S&P 500 SPX, -0.17% fell 3.44 points, or 0.2%, to 2,085.22, with consumer staples shares seeing the largest drop. The Dow Jones Industrial Average shed 41.84 points, or 0.2%, to 17,888.83, with Procter & Gamble Company PG, -1.76% and Travelers Companies Inc. TRV, -0.99% emerging as the biggest losers on the blue-chip gauge. The Nasdaq Composite COMP, -0.24% dropped 12.04 points, or 0.2%, to 5,046.37. Democratic nominee Hillary Clinton’s lead in the polls over her Republican rival, Donald Trump, narrowed, which has been widely cited as a reason for the selloff.(6)

Contributor: Matthew Scheivert

Sources:
Wells Fargo Economics Group: (1), Market Watch (2), Financial Post (3), The Financial Times (4), Businesswire (5), Latin America Herald Tribune (6),United Press International (7), Bloomberg (8), CNN Money (9), Morningstar (10), Newser.com (11), The Wall Street Journal (12), Reuters (13)