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That screeching sound you heard this week was the US Federal Reserve’s abrupt U-turn on monetary policy. In a move that shocked/bemused markets, Fed Chair Powell announced he was putting future interest rate rises on hold. Less than a month ago investors had been expecting two further hikes this year. No longer. Powell also said the Fed would be more “flexible” in reducing its balance sheet. He attributed the volte faceto slowing global growth, the US/China trade spat, muted inflation and Brexit.
Some commentators, however, accused Powell of caving in to Wall Street. Markets were still reeling from a tumultuous fourth quarter and in need of some good news. A few hardier hacks suggested President Trump’s scathing tweets forced the Fed’s hand. The former businessman has made it crystal clear that he really, really, really hates higher interest rates. Either way, markets were delighted. The S&P 500 climbed 1.6% on Wednesday, while emerging markets and the Chinese renminbi also joined the party.
The Brady Bunch
“Theresa’s Triumph!” So ran one headline this week (no prizes for guessing in which publication). And it was a triumph of sorts. For, in a rare sign of Tory party unity – Rees-Mogg and all – the UK PM was able to pass the Brady amendment through Parliament by 317 to 301 votes. The motion will allow her to return to Brussels to seek changes to the Brexit Withdrawal Agreement. This includes replacing the much-hated Irish backstop with “alternative arrangements”. And it’s here where things get tricky.
For one thing, the amendment asks for changes that Mrs May spent weeks saying were impossible. After all, her previous mantra was: “It’s my deal or no deal”. For another, details were scant as to what the “alternative arrangements” would actually entail. Some spoke of a ‘binding addendum’, others of as-yet-unknown ‘technology’. Oh, and there was the small matter of the EU rejecting the proposal out-of-hand. Indeed, it took Donald Tusk, the European council president, all of six minutes to kybosh the deal. “The backstop is part of the withdrawal agreement, and the Withdrawal Agreement is not open for renegotiation.” Quite.
So, where does all this leave us? Mrs May will now head to Brussels for the umpteenth time to try and secure something – anything – that will help get her deal over the line. We fear her chances are slim. She will then return to the Commons to put whatever offer she has to a final vote. Ministers have pencilled in 14 February – AKA Valentine’s Day. The PM will no doubt be hoping that’s amore and not a massacre.
PS…
….while all attention was on May’s “victory”, Barclay’s was making an announcement of its own. The bank said that it is moving £160 billion of assets to Dublin due to ‘No deal’ uncertainty. The transfer involves 5,000 clients and 150 jobs. The UK Treasury’s coffers will also take a hit. Another “Brexit dividend”, then. For Dublin, of course.
On the markets
The fourth-quarter reporting season is now in full swing, and the early results are encouraging. Of the 38% of S&P companies that have reported, 66% beat expectation on earnings. This included Boeing, whose shares took flight on record full-year revenues. Meanwhile, Apple’s numbers were better than feared following an early January profit warning. A relief rally ensued. On the Continent, luxury goods maker LVMH announced record sales and profits for 2018. It appears Chinese consumers can’t get enough Belvedere and Berluti, despite the economic slowdown.
Putting all this together, the S&P 500 and FTSE 100 were up 1.5% and 2.3% respectively over the week to close on Thursday. However, the FTSE Europe ex-UK finished, as Italy slipped into recession.
And finally…
Ah, the calamitous Asian tattoo. You know the one. The besotted chap wishes to immortalise his beloved’s name in ink. But it can’t just be any tattoo. No, it has to be something special. Something spiritual. Something ancient. And so, our gallant suitor opts for the pictorial beauty of the Japanese language. However, something gets lost in translation and instead of saying ‘Becky forever’ the tattoo reads ‘rigorous man-shed’. And so it came to pass for pop-sensation Ariana Grande this week. The superstar singer was attempting to commemorate her hit single 7 Rings with a Japanese tattoo on her palm. However, as fans were quick to point out, the actual tattoo said shichirin – or ‘small charcoal’ grill. Cue endless LOL’s and mocking memes. Still, the singer took it in good spirits and the error has been corrected. Perhaps to ‘grande charcoal grill’?
