“Even if you’re on the right track, you’ll get run over if you just sit there.”
Will Rogers (1879-1935)
Mr Rogers was a man of multiple talents – Depression-era humourist, newspaper columnist, political commentator, vaudevillian and cowboy. But while the world’s current cast of central bankers can probably only dream of such versatility, neither can they be complacent one-trick ponies. These days, investors wait anxiously for the Prestige after every policy meeting.
The decision makers at the Bank of Japan (BoJ) might be wishing they’d paid heed to Will’s wise words this week after their resolve to just sit there was roundly jeered. Investors had hoped the news that Japan had slipped back into deflation would encourage the BoJ to pull something marvellous out of the monetary policy hat. And when the bunny failed to materialise, the yen surged in response. This, in turn, led to a sharp decline in Japan’s export-sensitive equity market, and the broad-based Topix index fell 4.76% in yen terms for the week to Thursday’s close.
In contrast, inertia from another of the world’s central banks was met with a hearty round of applause. Investors were relieved that the policy board of the Federal Reserve (Fed) had decided to leave US interest rates unchanged, despite continued improvement in the US labour market.
A pomaceous predicament
The Fed’s inaction provided some welcome respite, coming as it did after a disappointing profits announcement from Apple. The technology giant was bitten by a drop in quarterly sales (compared to the same period the year before) for the first time since 2003. The company blamed the reversal on slowing sales of its core products in China and the relative strength of the dollar.
Don’t bank on it
At home, there was disappointment for the banking sector, as Royal Bank of Scotland announced that its losses over the first three months of 2016 had more than doubled compared to the same period the year before. Results from Lloyds Banking Group were better than expected, although they still showed a 6% drop in underlying year-on-year profits for the first quarter.
BP’s earnings report was also well received on the basis of smaller-than-expected losses. Last week, the company faced a shareholder revolt in protest at the pay of its chief executive, Bob Dudley. Several other large UK companies, including Weir Group and Shire have also encountered rebellion on the subject of executive rewards. The FTSE All-Share index was up 0.32% over the four days to yesterday’s close.
While the ability to walk on water has long been accepted as an indication of divine tendencies, it appears that trying to run huge distances on the wet stuff might receive a less-than-rapturous response. Reza Baluchi, a 44-year-old long-distance runner, discovered this to his chagrin, after setting off on an attempt to run around the Bermuda triangle in an inflatable bubble. His aquatic adventure came to a soggy end after the US coastguard caught up with him off the coast of Florida and towed him back to shore, having deemed his “hydropod” vessel “manifestly unsafe”. Ever had that sinking feeling?