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Market Outlook: Veering between confident and jittery

Driven by noticeably upbeat news on the state of the European economy (Germany in particular), strong quarterly figures and the positive results of the stress tests for European banks, we saw the risk appetite on the financial markets return to normal in July. This was aided by the fact that investors shifted their attention away from the European sovereign debt crisis. In spite of the ferocity of the crisis back in May, surprisingly, corporate and consumer confidence in the euro zone is now back at historically high levels. Germany’s growth figure over the second quarter (+3.7% compared to the same quarter last year) was also unexpectedly strong. In China, growth is slowing in line with our forecasts.

Yet in our complex global economy, which is dominated by huge uncertainty, the jitters are never far away, as was proved in August. The reason was disappointing US indicators on job growth and consumer and corporate confidence. At the same time, US Congress is becoming increasingly averse to boosting the private sector via fresh fiscal measures. However, this could be the appropriate policy, in view of the disappointing job growth and confidence indicators.

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