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5 May 2016
The facade of central bank omnipotence - ANZ
Analysts at ANZ noted that the calendar ticking into May is traditionally seen as a good time to square up and head away for an extended holiday while markets get a burst of volatility out of their system.
Key Quotes:
"It doesn’t always hold, of course – and the first three weeks of 2016 would be a hard act to follow – but it is true that equity market volatility has historically been higher in the second half of the year."
"One reason that is often touted is lower liquidity over the Northern Hemisphere summer. Some dark clouds are gathering over this holiday season. Most of these aren’t new, of course – question marks over the quality and sustainability of China’s growth and its implications for global commodity prices, the unresolved question of what to do about peripheral Europe and its banks, and political fragmentation, including the Brexit question."
"And the question remains that if the global economy were to tip into recession at some point, what ammo, precisely, do central banks have left that won’t do more harm than good?"
"We’ve seen some ‘interesting’ market responses to central bank actions (and inactions) of late that suggest the facade of central bank omnipotence is developing some cracks. And confidence is everything in the monetary policy game."
Key Quotes:
"It doesn’t always hold, of course – and the first three weeks of 2016 would be a hard act to follow – but it is true that equity market volatility has historically been higher in the second half of the year."
"One reason that is often touted is lower liquidity over the Northern Hemisphere summer. Some dark clouds are gathering over this holiday season. Most of these aren’t new, of course – question marks over the quality and sustainability of China’s growth and its implications for global commodity prices, the unresolved question of what to do about peripheral Europe and its banks, and political fragmentation, including the Brexit question."
"And the question remains that if the global economy were to tip into recession at some point, what ammo, precisely, do central banks have left that won’t do more harm than good?"
"We’ve seen some ‘interesting’ market responses to central bank actions (and inactions) of late that suggest the facade of central bank omnipotence is developing some cracks. And confidence is everything in the monetary policy game."