As we’ve talked about since the beginning of the year, there is currently strong momentum behind global growth. However, the “balance of power” is shifting from North America to the rest of the world. For example, economic surprise indices, measuring incoming data against expectations, are firmly in positive territory everywhere except the US. For now, this comes alongside moderating inflation (in particular the oil price failing to join the rally) and as such provides a “perfect calm” for equities.
If this continues, the next stage will surely be a step up in policy tightening from central banks. However, last week the ECB maintained a dovish tone (we anticipate a change post the second round of the French elections in June) as did the Riksbank in Sweden and the BOJ in Japan. This week we have a FED meeting where, despite the weak Q1 GDP print (more below), we expect the committee to leave a June rate hike on the table.
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