“I know a hawk from a handsaw.”
William Shakespeare, Hamlet
And so, evidently, do the markets. Four hundred years on from Shakespeare’s death, investors are in absolutely no danger of mistaking the merest hint of central-bank hawkishness for any kind of carpentry tool. This week, equity markets initially rallied as the oil price hit a six-month high, but then fell back sharply as Federal Reserve officials flexed their talons.
There were ruffled feathers throughout financial markets following the release of minutes from the Federal Open Market Committee’s (FOMC) April meeting on Wednesday. These indicated that Fed officials are eyeing June for the first rate hike of the year. Investors had grown increasingly comfortable – or complacent – that there would be no further rate rises until the second half of the year at the earliest. By looking towards June, the FOMC minutes set the hawk among the pigeons.
Fair is foul and foul is fair
It appears we’re now stuck where we’ve been so often in the past few years: that topsy-turvy world in which bad news (which lessens the probability of a rate rise) is received as good news, and vice versa.
Remember a few weeks ago when US GDP (gross domestic product) growth came in at just 0.5% for the first quarter? The worry now is that the Fed thinks this was just a seasonal slowdown, with the US economic recovery poised to bounce back – just as it has from weak first quarters in the past couple of years. Each sign of economic acceleration could cause further jitters in the months ahead, as investors cast an uneasy eye to June’s FOMC meeting.
Once more unto the breach, dear friends …
Other aspects of market behaviour had a wearyingly familiar tone this week. After an initial spike on the strengthening oil price, the FTSE 100 index fell back to finish down 1.4% at Thursday’s close. Commodity-related firms were again the bellwether for the market, with mining firms losing their lustre as the copper price fell to a three-month low.
Homebuilders had a better week. Taylor Wimpey and Barratt Developments were among the market’s best performers. Taylor Wimpey raised its guidance, pointing to the healthy state of the UK property market. Polls suggesting a receding chance of an ‘Out’ vote in the EU referendum provided further confidence in the UK’s housing sector, as some have feared a post-Brexit slump.
Rough winds do shake the darling buds of May
There was some heavy weather for raincoat firm Burberry. Its full-year profits fell by 10%, with the company pointing to fewer Chinese tourists buying at its European and Hong Kong stores. So far, investors appear unconvinced by the £100 million retrenchment the trenchcoat-maker has announced. Time to bring back the baseball cap, perhaps?
Thomas Cook has also lost its place in the sun. This week, the company announced a dip in revenue and a rise in net debt. Summer bookings are down, and so is the share price.
And finally …
In news that may mark a new departure for Anglo-European relations and considerable excitement for Game of Thrones fans, ghost-hunters believe that they have made contact with the spirit of Queen Isabella, the long-dead French wife of Edward II. The ‘She-Wolf of France’, as she was known in her lifetime, has been photographed swishing through the rooms of Castle Rising in Norfolk, a pet wolf in tow.
During a busy lifetime, Isabella packed in a royal marriage, leadership of a mercenary army, a scandalous affair and – it is alleged – the murder of her husband with a red-hot poker.
The ghost-hunters have yet to establish her views on Brexit.
