Following on from the OECD’s global economic outlook review, which we mentioned in our last Weekly Brief, the World Bank has become the latest organisation to upgrade its global GDP growth expectations. In its latest forecast, the World Bank said it is expecting 5.6% global growth for 2021; in January, that prediction, stood at just 4%, so this is another major upgrade. The World Bank added, however, that global output would still be around 2% lower than pre-pandemic levels by the end of the year.
World market participants and financial markets’ traders are looking out for signs that inflation is growing. However, despite consumer prices rising more than forecast in May (CPI YoY 5% vs 4.7%), the US 10-year treasury yield is still around 1.5%, compared to a reading of 1.7% just 2 months ago. This simply means that there is still no clear evidence of higher inflationary expectations being felt in treasuries, and the recent comments from market participants about a temporary overshooting of the inflation data is still in vogue.
Looking outside the US economy, the data (PMIs) coming from another important driver of the global economy, China, are clearly in expansionary territory. And, despite a recent 1% drop in orders of intermediate goods in Germany, orders are still almost 10% higher than they were in February 2020 – the month before coronavirus restrictions were imposed. It seems clear that economies around the world are, in an uneven way of course, seeing the end of the “pandemic tunnel” and moving out vigorously from the past year’s health and economic crisis.
Finally, the release of macro-economic data, and any statement provided by central bankers at the Fed this week, will be scrutinised closely by traders to assess and predict a change in monetary policy. We believe this will affect market sentiment and momentum.
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