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Health & Fitness

THE WEEK IN REVIEW "The Market Rally Returns"

THE WEEK IN REVIEW

Global stocks advanced broadly this week on Asian growth and renewed diplomatic efforts to defuse the Syrian crisis. The Dow Jones Industrial Average began the week with its biggest three-day rally since the beginning of January. Meanwhile, anticipation mounted as the world awaited the US Federal Reserve’s 17 – 18 September meeting. Two-thirds of economists polled in a Wall Street Journal survey expect the Fed to announce that it will begin to unwind its monetary stimulus.

Verizon’s $130 billion buyout of Vodafone led to a $49 billion corporate bond issuance, the largest ever. Other deals announced this week include the $7.2 billion purchase of fiber-optics specialist Molex by Koch Industries and the $6 billion acquisition of luxury retailer Neiman Marcus by Ares Management and the Canada Pension Plan Investment Board.

Japan’s economy grew at a 3.8% annual pace in the second quarter, more quickly than originally estimated. The country’s gross domestic product was initially thought to have grown at a 2.6% annual pace from April to June. Japan’s economy has now logged 4.1% and 3.8% annualized growth for the past two quarters, respectively, and is contributing to global growth for the first time in years. A corporate sentiment survey showed that the mood at large companies improved faster in the third quarter than at any time in the survey’s nine-year history.

China’s economy is rebounding, based on data from August. Exports rose 7.2% from a year earlier, up from a 5.1% rise in July. China’s industrial output rose 10.4% year-on-year, the highest growth rate since March 2012. Retail sales grew 13.4% in August, up from a 13.2% rise in July.

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Although the US housing market has steadily strengthened over the past year, reports are materializing of a possible US housing bubble and cooling in the market for new homes. A home affordability index tracked by the National Association of Realtors has been below its long-term trend line for four straight months. Rising interest rates and higher home prices are making homes less affordable. The last time housing affordability fell below its long-term trend was early 2004, at the start of the last housing bubble. Separately, a homebuilders’ survey by John Burns Real Estate Consulting found that August sales of new homes declined by 4% from July and 5% of respondents lowered prices, the highest percentage since March 2012.

Weekly US first-time jobless claims fell sharply for the week ended 7 September, by 31,000 to just 292,000. But that drop does not appear as impressive after accounting for computer problems in two states that are likely to have skewed the numbers. The four-week rolling average of jobless claims fell to 321,500 from 328,750, and the number of people continuing to receive unemployment benefits dropped by 73,000 to 2.87 million in the week ended 31 August. Thirty-four states and territories reported a drop in claims while 19 experienced an increase.

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A number of US economic reports underscore the still-tentative nature of the economic recovery. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment fell to 76.8 in September from 82.1 in August, a five-month low. The US producer price index (PPI) rose 0.3% in August, but core PPI, stripping out volatile food and energy prices, was unchanged. The 12-month core PPI rose 1.1%, the smallest increase since June 2010. Retail sales rose a seasonally adjusted 0.2% in August from July, lower than the 0.5% forecast. US export prices fell for the sixth straight month in August, signaling slack global demand, while import prices were flat.

The number of people employed in the eurozone fell 0.1% in the second quarter, according to the European Union’s official statistics agency. The total of 145 million people who had jobs was 1% lower than in the second quarter of 2012. The quarterly decline in jobs was less severe than the 0.4% drop in the first quarter, and wasn’t a surprise despite the eurozone officially breaking out of recession in the second quarter. It usually takes a few months for an increase in production to lead to increased employment.

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