Our outlook are as follows:
- Global markets have stabilized in recent days
- The UK and European Union face economic and political headwinds
- Renewed deflation worries (due to low oil prices) and volatile curren- cies will keep the ECB on its guard
- Bond markets have become even more pessimistic about the global outlook
- With the Brexit vote now cast, markets are digesting fresh developments. In re- cent days global markets have stabilised (Chart 1,2). Nevertheless, it is too early to conclude that the worst is over. The BoE, ECB will remain on their guard.
- ECB and the Bank of Japan (BOJ) has fueled the rally.
- For the US, implied rates are pointing to a Fed pause for the next 18 months while 10Y yields have dropped to 1.51%. While UST yields are low given that 2% growth persists there, rates are being held down by the QE / NIRP policies of other G7 central banks.