MACRO NEWS

 

US House passes tax cut; Senate bill passes committee
The US House of Representatives passed its version of the Republican tax bill by a vote of 227–205, with 13 Northeast Republicans, angered by the loss of tax deductibility of state and local taxes, voting no, along with all the Democrats The Senate Finance Committee passed its version of the bill late Thursday, with the full Senate expected to vote after the Thanksgiving holiday. If the Senate passes its version, the differences in the two bills could be ironed out in a conference committee before a final vote. GOP leaders hope to complete the process by Christmas, though it could linger into early 2018 if the two versions of the bill cannot be reconciled quickly.

 

Japan growth streak continues
Japan reported its seventh consecutive quarter of growth in the third quarter, the longest streak in more than 15 years. The economy expanded at a 1.4% annual pace last quarter, down from a growth rate of 2.6% in the April–June period. Rising exports were the main contributor to growth, the government reported.

 

Eurozone maintains solid growth
Europe is experiencing the fastest growth rate in a decade, rising 2.5% year over year, which is a faster pace than the 2.3% US rate. The United States, however, experienced stronger growth in Q3 than the eurozone. While growth is solid around the world, inflation remains below central bank targets. Eurozone core inflation rose a scant 1.4% in October, well below the European Central Bank’s target of near 2%. Growth in the United Kingdom was more subdued than on the continent, coming in at 1.5% annually. 

 

ECB’s Draghi: Robust recovery reliant on stimulus
Europe’s economic recovery is robust and the fall in unemployment has been remarkable, European Central Bank president Mario Draghi said on Friday, but inflation is not at a point where it can be self-sustaining without stimulus.

 

Venezuelan bondholders in limbo
Venezuela and state-owned oil company Petróleos de Venezuela (PDVSA) were declared to be in selective default by the three major credit rating agencies this week. Meanwhile, Russia agreed to restructure nearly $3.2 billion in Venezuelan debt, while China said it has confidence that Venezuela will be able to properly handle its debt issues. In an effort to assuage bondholders' concerns, PDVSA reportedly this week made an $80 million interest payment that was due on 12 October.

 

May’s continued leadership in focus
UK prime minister Theresa May’s continued leadership of the Conservative Party was called into question last weekend as the Sunday Times reported that 40 members of her party have agreed to sign a letter of no confidence. Forty-eight signatures are needed to spark a leadership vote. May’s grip on power remains tenuous, but with no obvious replacement waiting in the wings she may be able to hang on to her post as the Brexit process unfolds.

 

EARNINGS NEWS

 

Earnings growth faster for multinationals
According to FactSet Research, companies who make more than 50% of their sales outside the US showed much faster earnings growth in the third quarter than companies whose overseas sales come in at less than 50%. For the S&P 500 Index as a whole, earnings growth is running around 6.1%. For companies with the majority of their sales outside the US, that figure jumps to 13.4%. Companies whose sales are mainly inside the US saw their earnings grow just 2.3%. The revenue story is similar. Those with greater sales outside the US saw Q3 revenues jump 10% year over year, while those with mostly US sales rose 4.2%. The technology and energy sectors, with their heavy global exposure, were responsible for much of the outperformance, FactSet said.

 

THE WEEK AHEAD

 

Date

Country/Area

Release/Event

Tue, 21 Nov

United States

Existing home sales

Wed, 22 Nov

US

Durable goods orders, Fed minutes

Thu, 23 Nov

 eurozone

Flash purchasing managers' indices

Thu, 23 Nov

United Kingdom

Q3 gross domestic product

Thu, 23 Nov

US

Markets closed for Thanksgiving holiday

Thu, 23 Nov

Canada

Retail sales

Fri, 24 Nov

US

Flash PMIs

 

 

 

 

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 New; Financial Times; Forbes.com; CNNMoney.com; NBCNews.com.

 

This content is directed at investment professionals only.

 


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