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Expectations surpass facts

Published Friday, February 26th, 2016

The eagerly-awaited gathering of G20 finance ministers and central bankers got underway this morning and expectations are running high. Will they assuage concerns of waning global growth prospects? Will they give in to calls by the IMF and OECD to bolster fiscal measures and structural reforms? Will China clarify its currency policy? Judging by yesterday’s action on European and US bourses optimism that they will act is on the rise as risk assets enjoyed a healthy bounce helped in part by solid gains in the oil market.

Downbeat annual inflation data from the eurozone failed to dampen the upbeat mood as investors brushed-off news that January’s final reading had been trimmed to +0.3% as well as a survey of long-term inflation expectations which fell to a record low. The positive tone was tracked by UK assets which enjoyed some much needed respite as Brexit fears were temporarily put on the back burner. Sterling made its first advance in four days as further support came from confirmation that the UK economy expanded by a relatively brisk 0.5% in the final quarter of last year.

Meanwhile, a much needed injection of sturdy US economic data lifted the broader market sentiment after orders for durable goods – seen as an important gauge of business spending – rebounded 4.9% in January and more than reversed the previous month’s decline. A benign increase in US jobless claims was largely shrugged-off though a stiffer test will come from today’s second reading of 4Q’15 US GDP which is expected to be downwardly revised from an initial estimate of 0.7%.

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Posted by Stephen Brennock

Stephen Brennock joined PVM in 2013 after having worked as a project manager for a business development firm. He graduated with a degree in Business Management in 2007.