Week in Review

More Fed Rate Hikes Ahead

A review of the week's top global economic corporate and earnings news. 


For the week ending 23 February

  • Fed meeting minutes bolster case for rate hikes
  • ECB warns on dollar weakness, euro volatility
  • Final version of TPP trade deal released
  • UK Q4 2017 growth estimate cut to 0.4%
  • US existing home sales dropped in January

As of mid-day Friday: global equities declined slightly for the week; the US 10-year Treasury note yield rose to 2.92% from last Friday's 2.87%; the Chicago Board Options Exchange Volatility Index (VIX) was at 19.4; while the price of West Texas Intermediate crude oil rose modestly to $63 a barrel from last week's price. 


Fed meeting minutes bolster case for rate hikes
At its January meeting, the last with Janet Yellen serving as chair, the US Federal Reserve acknowledged the strengthening economic growth outlook in the United States, which bolstered its plans for raising short-term interest rates and led economists to support the idea of four rate increases in 2018. Growth forecasts were marked up based on the expected boost to the economy from tax cuts. Fed policymakers have indicated that the equity market gyrations in early February were unlikely to affect this plan. Following the announcement, the S&P 500 Index traded 0.4% lower, and the benchmark 10-year Treasury yield rose to 2.94%, the highest level since September 2013, before receding on Thursday.

ECB meeting minutes highlight concerns about dollar weakness and euro volatility
During the January meeting, ECB officials expressed concern over dollar weakness that could adversely impact euro exports and lower imported inflation. The officials weighed in following remarks by US Treasury secretary Mnuchin, who said a weak dollar is good for the US economy. The euro strengthened to $1.25 on the news but has since weakened, and the US has reaffirmed its strong dollar policy. Members agreed on monitoring volatility in the euro, and discussed their communication on the bank's quantitative easing program, which they agreed to leave unchanged. The ECB is now buying €30 billion of bonds a month under the €2.5 trillion quantitative easing program.

Remaining Trans-Pacific Partnership countries release final version of trade deal
Led by Japan, the 11 countries of the original Trans-Pacific Partnership — down from 12 since the US withdrew from negotiations in early 2017 — have released the final version of a deal aimed at cutting trade barriers. The agreement, called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), reduces tariffs in economies that account for 13% of global GDP, representing $10 trillion. The deal suspended several provisions originally considered at the US' behest, such as rules strengthening intellectual property protection for pharmaceutical companies, which some governments feared would raise the cost of medicine. The deal is expected to be signed in March 2018, and take effect at the end of 2018 or first half of 2019. The 11 countries are Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.

UK Q4 2017 growth estimate revised downward to 0.4%

The United Kingdom's Office of National Statistics revised downward the Q4 2017 GDP growth estimate to 0.4% (from a previous estimate of 0.5%). The estimate for 2017 as a whole was revised down to 1.7% (from 1.8%), making the UK the slowest-growing G7 economy. While services (accounting for roughly 80% of UK output) continued to drive growth at the end of 2017, several consumer-facing industries slowed, with higher prices faced by consumers. The Q4 estimate could still be revised higher or lower in the final estimate.

US existing home sales dropped in January
US existing home sales fell 3.2% in January from the previous month, and 4.8% from a year earlier, which is the steepest annual decline since August 2014. Low inventories, and rising prices and interest rates, seem to have contributed. Average 30-year fixed rate mortgage rates increased to 4.22% at the start of February compared with 3.95% at the start of January. January housing inventory showed the lowest count since 1999. The new US tax code limited the deductibility of very large mortgages and property tax bills; however, the National Association of Realtors notes that buying activity remains strong in expensive regions, and prospective buyers have not yet expressed major concerns about the impact of the new code.

Eurozone inflation moving further away from ECB's goal
As expected, inflation in the eurozone slowed last month, rising 1.3% year over year compared to 1.5% and 1.4% in November and December, respectively. This confirms that inflation is moving further away from the European Central Bank's target of just under 2%.


As of 23 February, 90% of the S&P 500 constituents have reported for Q4 '17. Blended earnings growth is expected to be 14.9% compared with the same quarter a year ago while revenues are expected to grow by 8.3%.







     Mon, 26 Feb         

United Kingdom      

Housing prices

Mon, 26 Feb

United States

New home sales

Tue, 27 Feb


Preliminary industrial production

Wed, 28 Feb


Consumer price index

Wed, 28 Feb


     Fed's Powell speaks, preliminary Q4 GDP    

Thu, 1 Mar


Unemployment rate, manufacturing PMI

Fri, 2 Mar




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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. 

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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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