LONDON/NEW YORK : Markets, bracing for a"no landing" scenario where global economic growth is resilient and inflation stays higher for longer, are dialling back appetite for both risk assets and government debt.
That means rates could be pushed higher too - a negative for risk assets. World stocks hit one-month lows on Wednesday, while Wall Street had its worst day of the year so far on Tuesday. Investors have now ditched expectations for rate cuts later this year and renewed their bets on higher rates, which in the U.S. are now seen peaking in July at about 5.3 per cent, up from about 4.8 per cent in early February.
China's reopening, an easing in Europe's gas crisis and strong U.S. consumer spending"are probably more bearish than positive for markets," said Richard Dias, founder of macro-economic research house Acorn Macro Consulting.For Paul Flood, head of mixed assets at Newton Investment Management,"if wage growth stays high and demand stays high, then the Fed will push up interest rates further and that's not a good environment for equity or bond markets.
GOODBYE RECESSION RISK? In December, most economists expected the U.S. economy to contract slightly this year but the consensus now is for 0.7 per cent growth. Fed officials have signalled that they will likely keep raising rates for longer than previously forecast.
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