A look at what some closely-watched market indicators are saying
The rapid reopening of China’s economy, plunging European gas prices and cooling U.S. inflation suggest a global recession may not be as deep and protracted as feared just weeks ago.
“The earlier worries of a recession being baked into the cake have been dialled back and that is positive for risky assets,” said Rabobank’s head of rates strategy Richard McGuire.MSCI’s World Stock Index is up 8% so far this year and the risk premium on junk bonds, or sub-investment grade debt, is at its lowest since the second quarter of 2022.
But many of the layoffs are from beaten down tech firms that hired aggressively during the pandemic, Goldman Sachs economist Ronnie Walker notes. Copper has also seen its price ratio to gold rise sharply from January’s three-month lows. If investors buy copper and dump gold, they are not too alarmed about the outlook.
“A lot of leading indicators and surveys look quite abysmal at face value, although many of them are stabilizing or even bouncing back,” said Patrick Saner, head of macro strategy at Swiss Re. “In the context of inflation, though, core services is what matters and that is underpinned by a still very strong labor market that isn’t showing many signs of slowing.”U.S.
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