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A familiar sense of anticipation settled over investors awaiting the result of the US Federal Reserve’s September deliberation. By and large, analysts and commentators expected the central bank’s interest rate-setting committee to hold firm and that’s exactly what it did. Despite leaving the base rate at 0.5%, the Fed hinted that a possible increase remains very much on the cards at its next conclave in December. Luke Bartholomew, fixed income manager at Aberdeen, believes the stage has been set for a move next time around: “I think we’ll see a hike in December, but after that, the hiking cycle will remain very slow and shallow.”
Earlier in the week, there was relief as the Bank of Japan (BoJ) decided not to push the Japanese base rate further into negative territory, keeping it at -0.1%. Negative rates have proved to be a bit of a headache for Japan’s financial sector, with their potentially undesirable implications for banks’ profitability. Instead, the BoJ announced it would buy up any 10-year government bond whose yield rises above zero. Meanwhile, a slightly vaguer pledge involves the continued purchase of assets until inflation “exceeds 2% and stays above that target in a stable manner”.
Overall, this monetary policy news was well received – global equities and government bonds rallied on the back of the Fed’s decision, while the dollar weakened. The greenback’s fall also had positive implications for emerging market currencies and commodity prices, with the improvement in the latter helping to push the miner-heavy FTSE 100 above 6,900. The index gained an impressive 3% over the week to Thursday’s close. Among its global peers, the FTSE World Europe (ex UK) was up 3.2%, while the S&P 500 rose around 1.8% in local currency terms. In Japan, the broad-based Topix index climbed 3.1%.
Bake-xit, Brex-Pitt, Brexit and BoJo
From the shock news that Mary Berry is quitting UK television favourite The Great British Bake Off as it moves from the BBC to rival station Channel 4 in a deal reportedly worth £75 million, to revelations that ‘Brangelina’ is no more, separation has been a hot topic. The protracted process of Britain’s divorce from the European Union was another headline-grabber, with Foreign Secretary Boris Johnson claiming that formal discussions on the subject would “probably” start early next year. Meanwhile, Sir Alan Duncan, a Foreign Office minister and former pro-EU campaigner alleged in a BBC documentary (filmed before the Brexit vote and aired this week) that Mr Johnson was in fact in favour of the UK’s EU membership, and had only campaigned for the Leave side in an attempt to further his career.
And finally…
Ever worried that your favourite feline friend is being starved of cultural stimulation? Well, fear not, because a member of the US National Symphony Orchestra has released an album entitled “Music for Cats”, with tunes specially arranged for the listening pleasure of the more precocious puss. Cellist David Teie claims that “very excitable cats are completely calmed” by the carefully selected melodies. While this may be true, no one’s sure if the classical compositions are entirely in keeping with the kitties’ tastes. Perhaps they’d find Phantom of the Opurra more tunaful.
