Last week, the world held its breath as Italy’s Mario Monti visited France’s François Hollande. But in predictable fashion, nothing beyond a cup of coffee and a nice photo op came out of the meeting.

The European Central Bank also gathered this week and many expected Mario Draghi would unveil his plan to save the euro.

In Olympic parlance, Drahgi delivered the dreaded fourth place finish as he failed to act on his aggressive language from the week before. Frankly, the markets should have known better, since the difficulty of coordinating the politicians across 17 different countries is like herding kittens, and delivering a short order policy response sufficient to deal with the crisis would be next to impossible.

Read: The Eurozone won’t collapse

The Federal Reserve also met this week and although they fell short of rolling out a QE3, the language of their policy statement was decidedly more dovish than the one in June. Their words telegraph an increasing bias to adding more unorthodox stimulus (Quantitative Easing, a.k.a. printing money).

Next up for Bernanke are the August Jackson Hole, WY meetings, which may serve as a pre-launch pad for another round of QE.

Read: QE3 or not QE3, that is the question

In economics, the theme remains one of weakness. China’s Purchasing Managers Index (PMI) teetered on the edge of contraction, while the Eurozone PMI data showed Germany, Italy, and France well into economic recession.

The U.S. manufacturing sector also contracted in July, but the markets ignored the news since the July employment report headline was better than expected.

However, diving into the numbers, one has to conclude that the employment situation in the United States is still unlikely to make significant improvement without the help of further stimulus.

Oil continued its recent rally this week fuelled by the employment data, continuing Mid-East tensions, and intensifying tropical storms. Natural gas prices eased with cooler North American temperatures expected and a larger than expected injection of gas into storage stockpiles. Canada’s dollar got the gold medal as it appreciated through parity on the back of higher energy prices.

We will see if markets can follow through on the positive boost from Friday’s employment report. This week’s earnings and economic data will be mostly weighted to the back end of the week with Canadian markets closed yesterday.

Read: Global economy dampens Q2 pension returns

U.S. and Canadian trade data for June is released on Thursday.

The Canadian trade deficit should widen to its largest in the past year. Exports should underperform imports and the slowdown in global growth should put downward pressure on both sides of the ledger.

The data should highlight the Bank of Canada’s concern about downside risks due to weaker global momentum and Canadian export demand. The U.S. trade balance is expected to have narrowed slightly in June. Weighing on imports is a large price-related decline in oil imports, as petroleum import prices dropped 10.5% on the month.

Also on Thursday, Canadian housing starts are expected to show emerging signs of a correction in home building. July housing starts should post the second decline in three months.

On Friday, Canadian employment should post another tepid showing in July. Signs of slower economic growth suggest the slower rate of job creation should be sustained for a third straight month.

Does the U.S. jobs report mean the economy is back on track?

The 172,000 rise in July private sector payrolls was well above the consensus forecasts, and the best showing in five months. It dwarfs the 72,000 increase in June.

After a string of disappointing economic news this is surely welcome, but it still may not be sufficient to alter the Fed’s bias toward QE3. The three-month moving average increased from 91,000 to 120,000, but this is still lackluster. As recently as April, the three-month average was 162,000 and at the end of last year it stood at 183,000.

The unemployment rate ticked up to 8.3% from 8.2% (largely a rounding adjustment) as the household survey showed 195,000 job losses after a 126,000 increase in June.

The US dollar initially bounced on the news but then reversed to come off quickly.

With bond prices under pressure and equities surging higher investors are clearly relieved the data wasn’t as bad as many had feared. But the jobs market remains underwhelming and the lackluster hiring suggests further muted growth in consumer spending likely lays ahead.

David Andrews is the Director, Investment Management & Research at Richardson GMP in Toronto. This team of research experts is responsible for monitoring and interpreting economic, geo-political situations, current market environments and trends.
@David_RGMP