Global weekly: In search of stabilisation

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Equity and bond markets are showing signs of stabilising. Oil prices moved upward this week, but remain volatile and a negative influence on market sentiment.

Equity, bond and commodity markets are in search of stabilisation. Equity markets recovered somewhat this week but remain fragile, owing to concerns regarding global growth, China and oil. Bond markets are also perceived to be doing slightly better. Spreads are narrowing and the move toward risk aversion is dissipating. Nonetheless, the move is small and spread levels remain elevated.

Some stabilisation has also been seen in the commodities market. The key base metals copper and zinc have stabilised since mid-January. The oil price, while climbing off its lows, remains volatile in search of a new equilibrium.

This week’s statement by the Fed made clear that the US central bank is in “wait and see” mode. The risks are now skewed towards later and fewer moves by the central bank in 2016. The bar for future rate hikes has been raised, given the strong US dollar, lower energy prices and falling equity prices. Group Economics continues to believe that the next hike in interest rates by the US Federal Reserve will be in June, but the risks of a delay have increased.

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