We awoke on Friday to the news that the Bank of Japan had cut interest rates to below zero. This marks a new departure in the central bank’s quest to stimulate the economy and banish the spectre of deflation. The move took markets aback, particularly since governor Haruhiko Kuroda stated forcefully only a week ago that the BoJ was “not seriously considering” a negative rate. The move has been blamed on the external influences of China’s slowdown and low oil prices, and not on economic weakness in Japan.
Tax attack
It also was a week when the newspapers’ financial pages have been dominated by disquiet over the reluctance of US multinationals to hand over money to Her Majesty’s Revenue and Customs. UK chancellor George Osborne hailed Google’s agreement to pay £130 million in back taxes as “a major success”. The deal ends a long-running investigation into whether the technology giant had dodged its liabilities by re-routing profits earned in the UK to its European base in low-tax Ireland. Opposition politicians have been less impressed by Google’s magnanimity; even Boris Johnson, London’s Conservative mayor, described the payment as “derisory”. Facebook and Apple have also been in the firing line. In 2014, according to the Financial Times, Facebook paid £4,327 in corporation tax.
In or out?
We also saw the escalation of debate over Brexit – that is, the possibility of UK exit from the European Union. Over the past three months, sterling has fallen by more than 6% against the dollar. Recently, the pace of decline has quickened and it appears the looming possibility of Brexit could be a contributory factor.
No sale
From a company-specific point of view, much of the focus was on the banks – in particular, the banks that were bailed out by the UK government after 2008. On Wednesday, Royal Bank of Scotland warned of its eighth successive full-year loss. It also revealed a variety of charges – including a large chunk of cash to plug its pension scheme deficit and a further £500 million to compensate for its past mis-selling of payment protection insurance. Shares were marked down 2% in reaction, seeming to put paid to prospects of a government share sale any time soon. One day later, the chancellor postponed the sale of the government’s remaining stake in Lloyds Banking Group, explaining that slowing growth and global market turmoil had sparked the delay. Mr Osborne vowed not to give the green light to the sale until the markets had calmed. The UK taxpayer still owns roughly 10% of Lloyds.
Continued turbulence in commodities affected equity markets in the UK and US. These oscillated in tandem with the swings in the oil price, moving higher even as Chinese shares fell to their lowest point since the end of 2014. Over the week to Thursday’s close, however, the FTSE-100 was just 0.53% ahead.
And finally…
There have been some scathing reviews of singers over the years. One critic said Tom Waits sounded like he was “gargling broken glass”; Neil Young’s voice sounded like a “whiny cat squeal”; and another said of Kate Bush: “Maybe if she stopped running up that £$@&* hill, she wouldn’t sound so out of breath all the time.” Still, there can be few more damning indictments of oral ability than the one delivered by the Dutch police earlier this week. Amsterdam’s Finest were alerted by neighbours to a suspected incident of domestic violence. “Screams of agony” emanating from a canalside house compelled the officers to start kicking down the front door. But before they forced their way in, the occupier – an opera singer – opened the door. He had been listening to an aria with headphones on, and had been singing along, oblivious to the commotion outside. “He appeared to be alone in the house,” acknowledged a red-faced police spokesman. “Luckily, both the singer and his neighbours were able to laugh about it.”
