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Director’s Cut
Outlook favours global cyclicals
In coming months, Richard Gibbs and our economics team believes the
global economy is likely to be dominated by European woes, as China and the
US grow. >> Read Report
The team continue to expect the US slowdown to be transitory, with a second
half rebound. With the June quarter looking softer than expected, he has
lowered the US 2011 GDP forecast to 2.8% from 3.1%. That said, he continues
to see this as a mid-cycle slowdown, and sees a large bounce in auto
production, net export growth and stronger capex given tax breaks and low rates
to support second half growth. The strongly positively sloped US yield curve
supports this conclusion, as it’s a clear indicator of strong economic growth.
They also believe the Chinese economy has reached an inflection point with the
outlook for growth and inflation now evenly balanced, and without the hard
landing that some commentators feared. This contrasts with other emerging
economies, particularly India, which are still grappling with high levels of inflation
and face policy driven slowdowns.
Turning to Europe, the economy is expected to lose momentum. Meanwhile,
given Greece does not have the capacity to repay its debt, our team expect an
organised and structured default. Ireland and Portugal will then be the next
problems to resolve, which will likely to see European sovereign debt remain at
the forefront of market concerns for up to 12 months. Despite recent events, he
is not as concerned about the potential for default in Italy.
Given this outlook, we continue to anticipate a second half rebound in equity
markets, with Asia and the US likely to benefit most. We also favour export
oriented countries (Korea and Germany) and global cyclicals, especially in
markets where the domestic side is challenged (Australia, Japan, Europe).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Director’s Cut
Outlook favours global cyclicals
In coming months, Richard Gibbs and our economics team believes the
global economy is likely to be dominated by European woes, as China and the
US grow. >> Read Report
The team continue to expect the US slowdown to be transitory, with a second
half rebound. With the June quarter looking softer than expected, he has
lowered the US 2011 GDP forecast to 2.8% from 3.1%. That said, he continues
to see this as a mid-cycle slowdown, and sees a large bounce in auto
production, net export growth and stronger capex given tax breaks and low rates
to support second half growth. The strongly positively sloped US yield curve
supports this conclusion, as it’s a clear indicator of strong economic growth.
They also believe the Chinese economy has reached an inflection point with the
outlook for growth and inflation now evenly balanced, and without the hard
landing that some commentators feared. This contrasts with other emerging
economies, particularly India, which are still grappling with high levels of inflation
and face policy driven slowdowns.
Turning to Europe, the economy is expected to lose momentum. Meanwhile,
given Greece does not have the capacity to repay its debt, our team expect an
organised and structured default. Ireland and Portugal will then be the next
problems to resolve, which will likely to see European sovereign debt remain at
the forefront of market concerns for up to 12 months. Despite recent events, he
is not as concerned about the potential for default in Italy.
Given this outlook, we continue to anticipate a second half rebound in equity
markets, with Asia and the US likely to benefit most. We also favour export
oriented countries (Korea and Germany) and global cyclicals, especially in
markets where the domestic side is challenged (Australia, Japan, Europe).
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