US and European equity markets ran into profit- taking yesterday following last week's strong gains as investors continued to weigh up the prospects for the global economy.
Jan Loeys, global head of market strategy at JPMorgan, said that while economic news had not been good, the “seeds of a recovery” were starting to sprout.
He said the global consumer had not been pushing up the savings rate in recent months, was continuing to spend and this will induce producers to start restocking by the summer. “We thus retain our view that both the US and world economy will stop contracting by the middle of the year,” he said. “Most market participants are not expecting a recovery until year-end, and will thus likely be forced to cover steadily their defensive positions. Hence our overweight positions in equities and credit.”