Poker face
How low would they go? That was the question on investors’ lips this week as they looked to the first meeting of the Bank of England’s Monetary Policy Committee (MPC) since the UK’s decision to leave the EU. At the end of June, Mark Carney, the Bank’s governor, had said that “some monetary policy easing will likely be required over the summer”. Most investors expected the MPC to cut the benchmark interest rate from 0.5% to a record low of 0.25%, but there were also suggestions that it might be cut to zero.
The FTSE 100 surged in anticipation of a rate cut, hitting a new 11-month high on Thursday morning. But then the MPC surprised virtually everyone by voting 8-1 to leave rates where they were. Shares fell back initially, and the pound rose to a two-week high. If investors weren’t aware that Mr Carney has a poker face, they are now.
Inevitably, attention has now turned to the next MPC meeting. The minutes from this week’s conclave said that “most members expect monetary policy to be loosened in August”. But the form of any new stimulus is so far unspecified. We shall have to wait to see how Mr Carney and the MPC play their cards.
Bully for you!
The rate disappointment came in the context of a good week, for the FTSE 100 – one that saw it technically enter a bull market on Monday and end up around 1.0% by Thursday’s close. A bull market is defined as a 20% gain from a recent low – in this case, the bottom of February’s commodity-driven slump.
There has been a great deal of discussion of how well the various equity indices reflect the economy, with the FTSE 100’s reliance on overseas earnings – and thus its direct benefit from a weakening pound – much remarked. Nevertheless, the more domestically oriented FTSE 250 was up for the week at Thursday’s close – though nowhere near bull-market territory. Of course, the existence of any long-term link between stock-market performance and growth in gross domestic product is widely disputed.
Game (of Thrones) over
This week, though, it was politics rather than economics, that gave markets their head. And if a week is a long time in politics, this one seems to have been on fast-forward. On Monday morning, Andrea Leadsom and Theresa May were squaring off for a three-month leadership campaign for leadership of both the Conservative Party and the country. By Monday afternoon, Mrs Leadsom had bowed out, on Wednesday, Mrs May was installed in Number 10 – and by the end of Thursday, Mrs Leadsom was in her first cabinet as Environment Secretary. The increased certainty brought by this swift resolution was a major factor in steadying markets this week.
Mining shows its mettle
This week’s strongest market performers included the mining stocks, with Anglo American, Rio Tinto and BHP Billiton to the fore. Stronger copper prices played a part in this, as did growing demand for higher-quality iron ore in China. There was also a recovery in housebuilders, with the likes of Taylor Wimpey and Barratt Development starting to claw back some of their post-referendum losses.
And finally …
China’s unconventional modern architecture has long been a source of grievance for its citizens. Residents complain that the demolition of traditional homes and an ‘anything goes’ approach to planning can make the urban environment a bit of a dump. From the CCTV ‘big pants’ towers in Beijing to NetDragon’s ‘Star Trek’ headquarters in Changle, architects often seem to treat Chinese cities like a playground. Well, that playground is now equipped with facilities, thanks to the new home of North China Water Conservancy and Electric Power. Earlier this year, the Chinese authorities issued new guidelines to curb the construction of weird buildings. Evidently, the architects aren’t listening. We’re flush with excitement to see what they do next …
