Global Markets Experience Uptick Amidst Economic Uncertainty
In the second quarter, global equities witnessed a surge, driven in part by impressive earnings from a select group of mega-cap technology companies. This upward trend was further supported by the European Central Bank’s decision to ease interest rates in June, while the US Federal Reserve maintained a steady policy rate. Despite these positive developments, China’s economic recovery remained sluggish due to ongoing struggles in the property sector.
Meanwhile, France’s far-right National Rally party made significant gains in the country’s legislative elections, potentially becoming the largest force in the lower house of parliament. However, it remains uncertain whether they will secure an absolute majority.
According to fund managers, the global macroeconomic environment is currently navigating a period of significant transition. While small reductions in interest rates are expected to boost risky assets, there is an underlying risk of a more pronounced deceleration in economic growth than previously forecasted. This potential slowdown is attributed to the financial strain on lower-income consumers and heavily leveraged corporations, which have been grappling with elevated interest rates and diminishing pricing power.
The fiscal response to these conditions has been substantial, but it remains unclear whether discretionary support will be enough to counteract the impact of these stressors. Furthermore, the global economy is facing a broad-based and sharper-than-expected slowdown, with inflation remaining persistently high, which could exacerbate the cost-of-living crisis and tighten financial conditions further.
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