Generally, it’s only reports of death that are said to be exaggerated, but the other Three Horsemen of the Apocalypse all made an appearance this week. Happily, though, investors seemed relatively unaffected by a sense of foreboding. Most major equity markets were fairly flat over the week.
Minutes of meetings do not usually make for lively reading, but those from the European Central Bank’s last pow wow caused a bit of a kerfuffle on their release this week. The missives revealed that some officials believe the US administration is knowingly attempting to devalue the dollar – or, in other words, to start a currency war. They cited concerns about “exchange rate developments” and “the overall state of international relations”.
In January, US Treasury Secretary Steven Mnuchin drew the battle lines by commenting that a weak dollar would be “good” for the US economy. While President Trump later contradicted Mr Mnuchin, insisting that he wants the greenback to get “stronger and stronger”, it appears that European policymakers are still worried about the global consequences of a weak dollar. Chief among these are adverse implications for European exports and inflation. In addition, the more hawkish members of the central bank’s rate-setting committee think the time has come to stop offering reassurance in every communication that more monetary stimulus will be forthcoming in the event of an economic slowdown.
Wednesday’s must-read was yet another set of minutes, this time from the US Federal Reserve (Fed). Several Fed officials believe recent strong economic data means the march towards normal interest rates should be quickened. Fear of aggressive changes to monetary policy led to some market volatility: bonds lost popularity, with the yield on the ten-year Treasury reaching a four-year high in the aftermath of the minutes’ release. Wall Street was down on the day, giving back the gains it made at the start of trading. The S&P 500 Index, which consists of the biggest companies in the US, dropped just 1.03% over the week to Thursday’s close.
Meanwhile, investors sounded the retreat for the world’s largest retailer. On Tuesday, Walmart’s shares suffered their biggest one-day percentage drop in 30 years, after its fourth-quarter earnings report revealed a punishing defeat at the hands of Amazon in the battle for online sales supremacy. Poorly received e-commerce figures – for what should have been Walmart’s busiest time of year – eclipsed better-than-expected sales at its physical stores. The share price was down more than 11% over the week.
The hunger games: playing chicken
Going hungry was more of a concern for UK consumers after a logistical snafu led to the closure of more than half of the KFC outlets in the country. Starving shoppers were denied their fast-food fixes as branches ran out of chicken due to difficulties with a new delivery contract, which was recently awarded to distributor DHL. While the debacle caused a bit of a flap at various news outlets, feathers at KFC’s and DHL’s respective parent companies, US-listed Yum! Brands and Deutsche Post, were more-or-less unruffled: both of their share prices were relatively unchanged over the week.
Meanwhile, UK economic growth was found to be more paltry than had previously been expected. According to the Office for National Statistics, gross domestic product increased by just 0.4% in the final three months of 2017. The FTSE 100 index was down 0.5% at yesterday’s close.
A plague on all your (banking) houses
In politics, UK Opposition leader Jeremy Corbyn attacked what he views as the pestilential nature of the country’s financial services sector, calling it “pernicious”, “destructive” and “undemocratic”. Mr Corbyn believes that the financial community is responsible for an “unequal economy” in the UK. He also promised to make the sector a “servant of industry”, should the Labour Party come to power. However, investors seemed relatively unplagued by doubt, with the FTSE All-Share’s financial sector falling only a little over the week. Overall, the FTSE 100 ended the week down 0.58%.
A photographer found himself beholding a dark horse in the Acciano area of Italy this week. Fabrizio Giammatteo had wanted to capture some images of wolves, and was delighted to discover a group lounging in the sunshine on a snowy slope. He hadn’t accounted for what turned out to be the mane attraction, though: a horse that he nicknamed Orazio. Shortly after Mr Giammatteo set up his camera, Orazio trotted into view (with no ashen rider in sight) and began to frolic among the languid lupines. While the plucky pony seemed very relaxed about the whole affair, even rolling over in the snow to show his belly, the pack seemed a little foxed by his actions. We have to wonder what Orazio’s owners think about the whole thing – are they aware that their horse prances with wolves?