Week in Review

US payrolls beat expectations

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


For the week ending 2 February 2018

  • US nonfarm payrolls increase
  • Fed signals it will maintain rate-hike pace
  • Negotiators report NAFTA progress
  • Europe finishes 2017 on strong note
  • Greenspan warns of bubbles

As of market close on Thursday global equities dropped by 1.6% from last Friday; the US 10-year Treasury note yield rose to a nearly four-year high, reaching 2.83%; the Chicago Board Options Exchange Volatility Index (VIX) rose to 14.5 from last Friday's 11.2, and the price of West Texas Intermediate crude oil ended the week at $65 a barrel.


US nonfarm payrolls increased in January
The US Bureau of Labor Statistics reported today that total nonfarm payrolls increased by 200,000 in January, beating expectations of an increase of 175,000. Most of the gains came from construction, food services and drinking places, health care and manufacturing. Average hourly earnings grew more quickly than expected, going up by 2.9% year over year. The unemployment rate remained at 4.1% for the fourth straight month.

No change in Fed policy as Yellen hands over the reins
Janet Yellen presided over her final meeting of the rate-setting Federal Open Market Committee on Wednesday. Jerome Powell is scheduled to be sworn in as the new US Federal Reserve chair on Monday. The FOMC made only minor tweaks to its statement after leaving rates unchanged, which the market read as reflecting a slightly more hawkish view. Yields continue to firm along the curve, with the 30-year bond touching 3%.

NAFTA talks advance
Meeting in Montreal, negotiators from the United States, Canada and Mexico concluded a sixth round of talks this week. The mood was modestly more upbeat than after prior rounds, with all three nations reporting movement, though US trade representative Robert Lighthizer said progress was very slow. Envoys from Canada and Mexico rejected a key US demand that the NAFTA signatories rework the corporate arbitration system now in place. The US maintains that the investor-state dispute settlement (ISDS) erodes national sovereignty.

Eurozone grew faster than US in 2017
Gross domestic product figures released this week show that the European economy grew faster than the US last year. The eurozone economy expanded by 0.6% in Q4, the 19th straight quarter of expansion. For the full year, the eurozone economy grew 2.5%, while the preliminary reading from the US was 2.3%. Despite the region’s strong growth, inflation remains well below the European Central Bank’s target of near 2%. Preliminary data indicate that consumer prices slipped to a 1.3% annualized growth rate in January while CPI prices held steady at 1%. Recent euro strength versus the dollar could further complicate the ECB’s efforts to boost inflation. 

Greenspan frets over bubbles
Former Fed chair Alan Greenspan told Bloomberg News this week that he sees two bubbles forming in asset markets: one in stocks and one in bonds. The bond bubble is the one that concerns him most. An increase in US government debt relative to the size of the overall economy would lead to the bubble bursting, he said.

US oil output surpasses 10 million barrels a day
In November, for the first time since 1970, crude oil production topped 10 million barrels a day, the US Department of Energy reported this week. Industry analysts expect production to continue to ramp up amid forecasts for daily output of 12 million barrels by the end of next year. Solid global economic growth and production cutbacks abroad have helped West Texas Intermediate crude prices stabilize around $65 a barrel.

Global PMIs stay firm
The global manufacturing sector remains in top gear in early 2018. Japan reported its manufacturing purchasing managers’ index reached its highest level in nearly four years in January, jumping to 54.8 from 54.0 in December. In January the eurozone PMI clocked in at 59.6, slightly below the previos month’s record 60.6. The US manufacturing index held firm at 59.1, down from 59.3, while China saw a downtick to 51.3 from 51.6.

US–Canada trade spat averted
The US International Trade Commission surprised observers by rejecting 300% tariffs on passenger jets produced by Canada’s Bombardier. It was widely expected that the panel would side with US company Boeing, but the commission said Boeing is not being harmed by US sales of the C Series jetliner.


Impressive earnings season continues
As of 2 February, 252 members of the S&P 500 Index have reported earnings for the fourth quarter of 2017. Earnings are expected to increase 13.4% versus the same quarter a year ago according to FactSet Research. Stripping out energy, 11.5% earnings growth is expected. Revenues are expected to increase 7.7% at the index level, and by 6.7% ex energy.





Mon, 5 Feb


Service sector purchasing managers’ indices

Tue, 6 Feb


Reserve Bank of Australia rate-setting meeting

Thu, 8 Feb


Trade balance

Thu, 8 Feb

United Kingdom

Bank of England rate-setting meeting

Fri, 9 Feb


Consumer price index

Fri, 9 Feb


Industrial production

Fri, 9 Feb


Employment report


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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