The Brexit saga has taken so many twists and turns since the 2016 referendum that one could be forgiven for tuning out entirely. Doubtless, many of us have. But this week’s developments were extraordinary enough to make anyone sit up.
Some commentators, however, accused Powell of caving in to Wall Street. Markets were still reeling from a tumultuous fourth quarter of 2018 and in need of some good news. A few hardier hacks suggested that President Donald Trump’s scathing tweets forced the Fed’s hand. The former businessman has made it crystal clear that he really, really, really hates higher interest rates. Either way, markets were delighted. The U.S. broader-market S&P 500 Index1 climbed 1.6% on Wednesday, while emerging markets and the Chinese renminbi also joined the party.
The Brady Bunch
“Theresa’s Triumph!” So ran one headline this week. And it was a triumph, of sorts. In a rare sign of Tory party unity–Jacob Rees-Mogg and his fellow members–UK Prime Minister Theresa May was able to pass the Brady amendment through Parliament by a vote of 317 to 301. The motion will allow Mrs. May to return to European Commission in Brussels to seek changes to the Brexit Withdrawal Agreement. This includes replacing the much-hated Irish backstop with “alternative arrangements.” And it’s here where things get tricky.
For one thing, the amendment asks for changes that the prime minister spent weeks saying were impossible. After all, her previous mantra was: “It’s my deal or no deal.” Additionally, details were scant as to what the “alternative arrangements” would actually entail. Some spoke of a “binding addendum,” others of as-yet-unknown "technology.” And there was the small matter of the European Union (EU) rejecting the proposal out-of-hand. Indeed, it took Donald Tusk, the European Council president, all of six minutes to kibosh the deal, commenting: “The backstop is part of the Withdrawal Agreement, and the Withdrawal Agreement is not open for renegotiation.”
So, where does all this leave us? Mrs. May will now head to Brussels for the umpteenth time to try and secure something–anything–that will help get her deal over the line. We fear that her chances are slim. She will then return to the House of Commons in the UK Parliament to put whatever offer she has to a final vote. Ministers have pencilled in February 14–aka Valentine’s Day. The Prime Minister will no doubt be hoping that’s amore and not a massacre.
While all attention was on May’s “victory,” Barclay’s was making an announcement of its own. The bank said that it is moving £160 billion (about US$210 billion) of assets to Dublin due to ”no deal” uncertainty. The transfer involves 5,000 clients and 150 jobs. The UK Treasury’s coffers will also take a hit—another “Brexit dividend,” then. For Dublin, of course.
On the markets
The fourth-quarter 2018 corporate earnings reporting season is now in full swing, and the early results are encouraging, in our view. Of the 38% of S&P 500 Index companies that have reported, 66% beat expectation on earnings. 2 This included aerospace and defense company Boeing, whose shares took flight on record full-year 2018 revenues. Meanwhile, Apple’s numbers were generally better than investors had feared following an early January profit warning. A relief rally ensued. On the European Continent, luxury goods maker French luxury goods maker LVMH announced record sales and profits for 2018. It appears that Chinese consumers can’t get enough Belvedere and Berluti, despite the economic slowdown.
Putting all this together, the S&P 500 and FTSE 1003 indices were up 1.5% and 2.3%, respectively, over the week as of the market close on Thursday. However, the FTSE Europe ex UK Index4 finished lower, as Italy slipped into recession.
Ah, the calamitous Asian tattoo. You know the one. The besotted chap wishes to immortalise his beloved’s name in ink. But it can’t just be any tattoo. No, it has to be something special. Something spiritual. Something ancient. And so, our gallant suitor opts for the pictorial beauty of the Japanese language. However, something gets lost in translation and instead of saying ‘Becky forever’ the tattoo reads ‘rigorous man-shed’. And so it came to pass for pop-sensation Ariana Grande this week. The superstar singer was attempting to commemorate her hit single 7 Rings with a Japanese tattoo on her palm. However, as fans were quick to point out, the actual tattoo said shichirin—or ”small charcoal grill.” Cue endless LOLs and mocking memes. Still, the singer took it in good spirits and the error has been corrected. Perhaps to ”grande charcoal grill”?
1 The S&P 500 Index is an unmanaged index considered representative of the U.S. stock market. Indexes are unmanaged and have been provided for comparison purposes only. No fees or expenses are reflected. You cannot invest directly in an index.
2 Source: Standard & Poor’s, January 2019
3 The FTSE 100 Index is a market capitalization-weighted index of the 100 largest companies traded on the London Stock Exchange.
4 The FTSE Europe ex UK Index tracks the performance of large- and mid-cap stocks in developed markets in Europe, excluding the UK.
Companies are mentioned for illustrative purposes only and should not be taken as a recommendation to buy or sell any security. It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities in this list.
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