Research Team at Danske Bank, notes that the financial markets saw a tumultuous start to 2016.
Key Quotes
“A sharp fall in oil prices has prompted fears about the emerging market commodity producers and the oil and financial sectors in both the US and the Eurozone. In addition, a weakening of economic data in major economies, notably the US, has added to concerns that the world economy is heading towards a new recession.
The surprise indexes for the US and Eurozone clearly point to economic weaknesses. The index, measuring whether or not economic releases beat consensus forecasts, has been negative for the US for more than a year and the surprise index has now turned sharply negative for the Eurozone as well. Furthermore, long-term inflation expectations are continuing to take a dive, suggesting that a growth bout is not around the corner.
Consensus forecasts have turned more cautious on the 2016 growth outlook for the world’s major economies. Notably, optimism about the US economy has soured since last summer and Chinese growth expectations have also been revised downward following the devaluation in August.
However, forecasters (and we agree) do not see recessions coming, with consensus still expecting the US and China to grow a healthy 2.5% and 6.5% in 2016, respectively, while it expects the Eurozone to grow at a persistent but rather low rate of 1.6%.”
(Market News Provided by FXstreet)