US payrolls fall for first time since September 2010
Hurricanes Harvey and Irma combined to bring an end to a seven-year streak of positive US payroll reports. Thirty-three thousand jobs were lost in September as a result of the storms, though the unemployment rate dipped to 4.2% due to a temporarily smaller labor force. Average hourly earnings rose to an annual rate of 2.9%, but economists warn that storm-related distortions are likely partially responsible for the rise. It is likely to be another month or so before the storms’ impacts work their way through the data. An unexpected positive effect of the hurricanes was a spike in September auto sales as consumers replaced vehicles damaged in the storms.

 

Declaration of independence expected from Catalonia
Catalonia, the wealthy Spanish region that is home to Barcelona, is expected to declare independence from Spain next week. The move comes in the wake of a crackdown by the Spanish central government on 1 October intended to suppress an independence referendum. Ninety percent of the ballots cast were for independence, with those opposed largely boycotting the vote. Analysts expect next week’s declaration to be largely symbolic, and Catalan leaders are likely to accept a devolution of powers from Madrid, particularly on fiscal matters, rather than pushing for a complete break. Catalonia pays roughly €10 billion more to the Spanish central government than it receives in state services. 

 

Global economy continues expansion
Figures from the United States, Europe and China released this week all showed continued solid economic growth. September figures for the US manufacturing and services sectors both showed their strongest readings in more than a decade, but the US data may have been somewhat distorted by the recent hurricanes. The Institute for Supply Management manufacturing index rose to 60.8, the highest level since September 2004, while the nonmanufacturing reading came in at 59.8, a level not seen since August 2005. European data were similarly robust, and China also showed continued upward momentum.

 

Trump reportedly narrows the Fed chair field
Bloomberg News reported this week that aides to US president Donald Trump have narrowed the list of candidates for chair of the US Federal Reserve to four, or perhaps five, people. Trump has reportedly spoken with Fed chair Janet Yellen about re-upping, though she is not expected to receive reappointment, according to the report. Sitting Fed governor Jerome Powell, former governor Kevin Warsh and National Economic Council director Gary Cohn have all reportedly spoken with the president about the position, while Stanford University economist John Taylor has apparently not been interviewed but is said to be under consideration. All are known quantities to the markets, with Warsh and Taylor seen as the most hawkish of the group.

 

Iran nuclear deal expected to be decertified
In a move that will likely draw criticism from European allies, President Trump is expected next week to decertify that the Iran nuclear deal — designed to restrain Iran’s nuclear ambitions — is in the security interests of the US. Presently, the president must certify the agreement every 90 days. If the president withholds certification, Congress then has 60 days to decide whether to reimpose sanctions on Iran. It is possible that the pact will ultimately hold together if Congress does not apply sanctions.

 

Puerto Rico’s bonds gyrate after talk of restructuring
An offhanded comment from President Trump that the $73-billion debt of Puerto Rico may get wiped out sent the island’s general obligation bonds skidding in price this week. Trading near 44 cents on the dollar before the comments, the bonds fell to around 30 cents before stabilizing, according to the Wall Street Journal. The White House later indicated that it does not intend to get involved in Puerto Rico’s restructuring.

 

First steps toward US tax reform underway
The US House of Representatives took the first step toward passing a tax overhaul by approving a fiscal- year 2018 budget blueprint. Congress must pass a budget before a tax bill is allowed, under Senate budget reconciliation procedures, to pass in that body with only 51 votes, rather than the 60 needed to end a filibuster. Passage of the House measure ups the odds that tax reform could be enacted early in 2018.

 

 

THE WEEK AHEAD

 

Date

Country/Area

Release/Event

Mon, 9 Oct

United States

Bond market closed for Columbus Day

Mon, 9 Oct

Canada

Markets closed for Thanksgiving

Tue, 10 Oct

United Kingdom

Industrial production

Wed, 11 Oct

US

Release of Federal Open Market Committee minutes

Thu, 12 Oct

eurozone

Industrial production

Fri, 13 Oct

China

Trade balance

Fri, 13 Oct

US

Retail sales, Consumer Price Index

 

 

 

 

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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