The United States and Chinese economies are showing improvement and a recession could even be avoided, according to Etsy Dwek, head of global market strategy, Dynamic Solutions.
According to the latest capital market pulse notes, manufacturing remained weak globally, but services, labour markets and consumers held up.
The equity market continued to rally, but at a slower pace than earlier in the year, which was supported by dovish central banks and improvements in US/China trade discussions.
Treasury yields stabilised to around 2.55 per cent after the temporary yield curve inversion, and Dwek noted that while some yield curve inversions often lead to a recession, not all of them do.
The extension of Brexit until October meant that it would continue to dominate headlines, with uncertainty over the progress on any deal.
Oil prices also continued to rally as the US announced it wouldn’t extend the Iran waivers beyond May. Along with concerns about output from Venezuela and Libya, this would continue to support prices in the near term, but would still depend on if OPEC and Russia increased production.
The chart below shows the returns for the year to date of the North American Equities sector and the Asia Pacific Single Countries sector, which includes China.
Source: FE Analytics
