MFS Week in Review
A review of the week's top global economic and capital markets news.
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A review of the week's top global economic and capital markets news.
For the week ending February 7, 2025
As of midday Friday, global equities were modestly higher on the week after reversing early week losses after the U.S. imposed, than postponed, tariffs on Mexico and Canada while leaving them in place against China. The yield on the U.S. 10-year note was little changed at 4.50% despite a slowdown in the U.S. services sector and softer-than-expected nonfarm payrolls. The price of a barrel of West Texas Intermediate crude fell about a dollar to $71.10 after the immediate threat of tariffs on Canadian oil dissipated. Volatility, as measured by futures contracts on the Cboe Volatility Index (VIX), rose to 16.5 from 15.35 a week ago amid a volatility policymaking environment.
MACRO NEWS
U.S. postpones tariffs on Mexico and Canada but not China
Markets reacted negatively on Monday morning to the signing of an executive order by U.S. President Donald Trump last week imposing 25% tariffs on Mexico and Canada and 10% levies on imports from China. By midmorning on Monday, after discussions with Mexican President Claudia Sheinbaum, Trump postponed the duties on that country for 30 days and did the same Monday afternoon after speaking with Canadian Prime Minister Justin Trudeau. Both leaders pledged to devote more resources to stemming the flow of immigrants and fentanyl to the U.S.. However, China was not spared, and Trump has yet to speak with President Xi Jinping. Markets took the tariffs on China in relative stride given that Trump had threatened levies as high as 60% while on the campaign trail. China retaliated with 15% tariffs on less than $40 billion in imports from the U.S., set to come into effect on 10 February, while launching antitrust investigations against several U.S. technology companies and expanding export controls on key minerals. While no tariffs have yet been levied on the European Union, Trump said Sunday night they would “definitely happen.”
Trump outlines tax priorities
President Trump met with Republican lawmakers on Thursday to outline the priorities he wants to see in the upcoming budget reconciliation bill. Trump wants to end taxes on tips, Social Security benefits and overtime pay, raise the federal deduction for state and local taxes and lower corporate taxes on products made in America. To offset some of the costs of these priorities, Trump wants to end both the carried interest tax break on private equity and venture capital and a tax break for the owners of sports teams.
French PM forces through budget
French Prime Minister François Bayrou forced through the country’s 2025 budget using a tool known as article 49.3, which allows a minority government to pass legislation without a parliamentary vote, after which he survived a vote of no confidence. French bonds rallied after the vote, narrowing their yield gap with German bunds. The budget passed with the backing of French Socialists after Bayrou trimmed deficit cuts to €52 billion from an initial €60 billion. The budget projects a deficit of 5.4% of GDP.
Bessent says Trump not pressuring Fed
U.S. Treasury Secretary Scott Bessent said this week that the Trump administration is focused on the U.S. 10-year Treasury yield, not the funds rate and that the president is not pressuring the U.S. Federal Reserve to lower interest rates. The administration is working on lowering energy prices, spurring noninflationary growth and cutting the size of government, he said. Bessent reiterated his goal of cutting the deficit to GDP ratio to 3%, increasing U.S. oil production by 3 million barrels a day and economic growth rate to 3%. Tariffs are focused on returning manufacturing to the U.S., the secretary said.
January U.S. employment data send mixed signals
While nonfarm payrolls rose only 143,000 in January, average hourly earnings jumped 0.5%, the unemployment rate dropped to 4% from 4.1% and the prior two months payrolls were revised higher by 100,000. After annual benchmark revisions, the U.S. economy added an average of 166,000 jobs a month, down from the originally reported 186,000. The data reinforced expectations that the Fed will remain sidelined in the near term.
QUICK HITS
Country or Region |
Manufacturing PMI |
Services PMI |
Composite PMI |
Eurozone |
46.6 from 45.1 |
51.3 from 51.6 |
50.2 from 49.6 |
United Kingdom |
48.3 from 47.0 |
50.8 from 51.1 |
50.6 from 50.4 |
Japan |
48.7 from 49.6 |
53.0 from 50.9 |
51.1 from 50.5 |
China |
49.1 from 50.1 |
50.2 from 52.2 |
50.1 from 50.5 |
U.S. (ISM) |
50.9 from 50.0 |
52.8 from 54.1 |
N/A |
Past performance is no guarantee of future results.
Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research, CNBC.com.
This commentary was first published in the United States by MFS and is distributed in Canada by SLGI Asset Management Inc., with permission.
MFS Investment Management or MFS refers to MFS Investment Management Canada Limited and MFS Institutional Advisors, Inc. MFS Investment Management Canada Limited is the sub-advisor to the Sun Life MFS Funds; SLGI Asset Management Inc. is the registered portfolio manager. MFS Investment Management Canada Limited and MFS Institutional Advisors, Inc. have entered into a sub-advisory agreement.
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Information presented has been compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made with respect to its timeliness or accuracy. This commentary may contain forward-looking statements about the economy and/or markets; their future performance, strategies or prospects. Forward-looking statements are not guarantees of future performance, are speculative in nature and cannot be relied upon.