MACRO NEWS

 

US hiring managers went fishing in August
History shows that August is traditionally one of the slowest months of the year for new hires, and this August was no exception. US nonfarm payrolls rose a less-than-expected 156,000, missing estimates for a 180,000 rise. The unemployment rate ticked up to 4.4% from July’s 4.3%. Payrolls for the prior two months were revised lower by a combined 41,000. On a brighter note, the August Institute for Supply Management manufacturing index reached a six-year high of 58.8, up from 56.3 in July. Manufacturing data across the developed world were on the firm side, suggesting the synchronized global economic upturn remains intact.

 

Gasoline prices rise as Houston begins recovery
An estimated 23% of US refinery capacity is offline because of flooding in the wake of the exceptionally slow-moving Hurricane Harvey. Nationally, gasoline prices have risen an average of 17 cents a gallon since Harvey made landfall and now average $2.45, according to AAA. The storm, which left at least 39 dead and displaced tens of thousands, is expected to be one of the most expensive natural disasters in US history. Parts of the Houston area received in excess of 50 inches of rain, a US record for a single event. Markets have largely taken the news in stride. Prices of municipal securities issued around the Houston region have not been heavily impacted, nor have bonds of companies in the insurance and energy industries.

 

North Korea ups the ante
North Korea conducted several missile tests this week in response to annual US-South Korea military exercises. The second launch drew particular scrutiny as the missile crossed over Hokkaido, Japan’s northern island. US and South Korean aircraft replied by conducting tests of bunker busting bombs on a range near the North Korean border. Equity markets briefly sold off on risk aversion at midweek before recovering losses. US 10-year Treasury note yields dipped briefly to 2.08% while safe-haven currencies like the Japanese yen and the Swiss franc also rallied.

 

US growth revised up
The US economy grew at a 3% annual pace in the second quarter, an upward revision from the 2.6% pace reported in July. Spending was robust by both consumers and businesses in Q2, with capital expenditures expanding at an 8.8% rate — the fastest in nearly two years. Corporate profits rose 8.1% year over year.

 

Merkel adopts Macron’s call for eurozone finance minister
German chancellor Angela Merkel has joined French president Emmanuel Macron in calling for the creation of a eurozone finance minister in order to increase fiscal integration in the single-currency area. However, specifics on what duties would fall to such a minister remain vague. Merkel is in the home stretch of her campaign for a fourth term as chancellor. Germans go to the polls on 24 September.

 

Trump stumps for tax reform
US President Donald Trump travelled to Missouri this week to make the case for overhauling the US tax code. The president called this a once-in-a-generation opportunity to reshape the increasingly complex US tax system. But, the president offered few specific policy proposals beyond calling for a code that is fairer for lower- and middle-class Americans and for the corporate tax rate to be lowered to 15%, a level he said would create jobs and raise wages. Tax reform faces an uphill battle, with an already packed legislative calendar set to become even more crowded as lawmakers begin to address disaster relief for the Texas Gulf Coast.

 

High-tax Denmark looks to cut rates
Denmark is proposing the equivalent of $3.7 billion in income tax cuts as an incentive for citizens to work and to save for retirement, according to the country’s finance minister, Kristian Jensen. In 2016, tax revenues in Denmark were the highest in the developed world at nearly 47% of gross domestic product, according to the Organization for Economic Cooperation and Development (OECD). Tax revenue as a percentage of GDP in the 35-member OECD averaged 34.3%, while Americans paid an average of 26.4%.

 

Brexit talks grow acrimonious
The third and latest round of Brexit negotiations ended on an acrimonious note, with the two sides unable even to agree on whether any progress had been made during the week. British Brexit secretary David Davis said concrete progress had been made while the European Union’s Michel Barnier said no progress had been made. There has been no agreement on key issues such as the Northern Ireland border, citizen’s rights and the size of the Brexit divorce payment. The EU has stated that sufficient progress must be made on those issues before discussion of the United Kingdom’s future trade relationship with the EU can be taken up.

 

THE WEEK AHEAD

 

Date

Country/Area

Release/Event

Mon, 4 Sep

United States, Canada

Markets closed for Labor Day

  Tue, 5 Sep

Australia

Reserve Bank of Australia interest rate decision

Tue, 5 Sep

global, ex-US

Service sector purchasing managers' indices

Tue, 5 Sep

eurozone

Q2 GDP, retail sales

Wed, 6 Sep

US

Nonmanufacturing PMI, Fed Beige Book

Wed, 6 Sep

Canada

Bank of Canada interest rate decision

Thu, 7 Sep

eurozone

European Central Bank interest rate decision

Fri, 8 Sep

Japan

Q2 GDP

Fri, 8 Sep

China

Trade balance

Fri, 8 Sep

United Kingdom

Industrial production

Fri, 8 Sep

Canada

Unemployment rate

 

 

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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