Image default

29 February 2012: SH: Economic & Strategy Viewpoint – February 2012

Global forecast update: Growth upgraded, but problems remain
Europe: Credit crunch tempered…      

Azad Zangana –
European Economist
Keith Wade, Chief Economist & Strategist

    For professional investors and advisers only.This document is not suitable for retail

    Global forecast update: Growth upgraded, but problems remain
    • We have upgraded our forecasts for global growth in response to better data and a further easing of policy. In particular, the success of the European Central Bank’s long term liquidity operations and surprising resilience of Germany mean that we expect the recession in Europe to be shallower than before.
    • However, it is still a weak picture. We do not see US activity taking off as the de-leveraging process has further to run. Much of the recent improvement in growth reflects an inventory cycle as the factors which held the economy back last year fade and go into reverse.
    • In the Euro area the latest bailout of Greece is doomed to fail, being based on the mistaken belief that austerity can create growth. Consequently we see Greece leaving the Euro in 2013 following a change of political direction after fiscal slippage and increased demands for more austerity. 
    • The principal risk to our central outlook is the familiar one of increased oil prices with the current threat coming from the stand-off over Iran’s nuclear programme. The energy tax is already rising, and a spike in prices could send the world economy back into recession.

    Europe: Credit crunch tempered
    • The European credit crunch appears to have been tempered by the 3-year liquidity auctions from the ECB. Longer term cheap financing to the banking system seems may have averted a European Lehman Brothers event, helping to boost investors’ confidence and lower the cost of borrowing for the Spanish and Italian governments.
    • However, banks are still under pressure to deleverage, and with fiscal tightening taking place for the next 2-3 years, we continue to forecast recession in the Eurozone, especially in peripheral Europe.
    • Core Europe appears to be more resilient than previously forecasted, though will probably struggle to take off given such weak demand from its neighbours. Nevertheless, it appears that the outlook has improved from a few months ago, which reduces the likelihood that the ECB will conduct quantitative easing.

    The views and opinions contained herein are those of the Kevin Murphy and Nick Kirrage, Specialist Value UK Equity Fund managers and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds.

    For professional investors and advisers only.This document is not suitable for retail clients.

    This document is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Investment Management Ltd (Schroders) does not warrant its completeness or accuracy. No responsibility can be accepted for errors of fact or opinion. This does not exclude or restrict any duty or liability that Schroders has to its customers under the Financial Services and Markets Act 2000 (as amended from time to time) or any other regulatory system. Schroders has expressed its own views and opinions in this document and these may change. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions. Issued by Schroder Investment Management Limited, 31 Gresham Street, London EC2V 7QA, which is authorised and regulated by the Financial Services Authority. For your security, communications may be taped or monitored.

     Source: IFAWorld – Schroders

    Normal 0 14 MicrosoftInternetExplorer4


    Articoli Simili

    UBS WM: Italian Election Watch – Electoral law fine-tuned


    Credit Suisse: Frontier markets – the richly diverse path to yield


    HSBC: Italian referendum Too many no’s, Renzi goes