GLOBAL MACRO NEWS
US payrolls rise more than forecast
Nonfarm payrolls rose 235,000 in February, more than economists had forecast. The strong data, along with upward revisions to prior months, have prompted Fed watchers to begin to forecast a faster pace of tightening by the US Federal Reserve. In addition to the potential for more-frequent rate hikes, observers are discussing the prospect of the Fed beginning the process of reducing the size of its balance sheet late in 2017 or early in 2018. The unemployment rate dipped to 4.7%, while the labor participation rate rose to 63%.
ECB signals a lower sense of urgency
European Central Bank president Mario Draghi said this week that deflation risks in the eurozone have “largely disappeared,” as ECB inflation forecasts were raised to 1.7% from 1.3% for 2017 and 1.6% from 1.5% in 2018. In a sign of receding deflation concerns, the ECB dropped from its opening statement the phrase that it is prepared to use “all available instruments available within its mandate.” However, Draghi warned that downside risks remain, particularly around the geopolitical sphere.
China signals slightly lower growth ahead
At its annual meeting of the National People’s Congress, China announced it had trimmed its official economic growth target to 6.5% for 2017 from a range of 6.5%–7% in 2016. Actual growth in 2016 was 6.7%. Also this week, China reported a rare trade deficit. Analysts are wary of data from January and February given the variable timing of the Lunar New Year holiday.
Scottish leader floats notion of second independence vote
Scottish first minister Nicola Sturgeon says late 2018 could be the best time for a second referendum on independence from the United Kingdom. The timing would coincide with the shape of the UK’s Brexit deal becoming clear, the minister said. Scotland voted in 2014 to remain a part of the UK, but Brexit has set off fresh calls for independence. Further related to Brexit, UK prime minister Theresa May continues to tussle with the House of Lords, with the upper chamber voting to amend the Article 50 bill to force Parliament to vote on the final outcome of the government’s negotiations with the European Union. The bill will now be sent back to the House of Commons, where it is expected to be overturned.
German factory orders hit air pocket
German factories started the year with a thud as new orders plummeted 7.4% in January, the largest drop since the depths of the financial crisis in 2009. Orders rose 5.4% in December and survey data have been strong, so economists warn not to read too much into one month’s data.
US trade gap widens
The United States reported its largest monthly trade deficit in nearly five years this week. January’s deficit rose 9.6% from December, to $48.5 billion. US Commerce Secretary Wilbur Ross, calling for free and fair trade, said the latest data show that there is much work to be done on trade agreements.
South Korean president removed from office
South Korea’s president, Park Geun-hye, was forced from office today as the country’s Constitutional Court unanimously upheld the National Assembly's vote to impeach her after she became embroiled in a corruption scandal. Presidential elections must be held within 60 days, with acting president Hwang Kyo-ahn heading the government in the interim.
THE WEEK AHEAD
- The United States and Canada turn their clocks ahead one hour for daylight saving time on Sunday, 12 March
- China releases retail sales figures on Tuesday, 14 March
- Eurozone industrial production is reported on Tuesday, 14 March
- US retail sales for February are released on Wednesday, 15 March
- The US Federal Reserve meets to set interest rates on Wednesday, 15 March
- The Netherlands holds a general election on Wednesday, 15 March
- The Bank of Japan holds a rate-setting meeting on Thursday, 16 March
- The Bank of England meets to set interest rates on Thursday, 16 March
- The US reports industrial production data on Friday, 17 March
Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon and tolerance for risk. Diversification does not guarantee a profit or protect against loss.
The information included above as well as individual companies and/or securities mentioned should not be construed as investment advice, a recommendation to buy or sell or an indication of trading intent on behalf of any MFS product.
Securities discussed may or may not be holdings in any of the MFS funds. For a complete list of holdings for any MFS portfolio, please see the most recent annual, semiannual or quarterly report. Full holdings are also available on the individual Fund Summary tab in the Products section of mfs.com.
Past performance is no guarantee of future results.
Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times; Forbes.com; CNNMoney.com; NBCNews.com.
This content is directed at investment professionals only.