Sunday, May 23, 2010

Global Data Watch; The J.P. Morgan View;Equities, Fixed Income, Economics and

Global Data Watch: Our outlook for a strong and resilient expansion is being challenged Heightened uncertainty about Euro area fiscal and monetary regimes DM core inflation hits record low in April; further declines lie ahead.  

The J.P. Morgan View:  Q&A on market sell off.
· : Keeping risk tight, avoid consensus trades where feasible, but not giving up on medium-term bullish view on risky assets.
· Economics: Slightly softer data may unnerve markets but are not enough to change our growth forecasts.
· Fixed Income: Bond yields to move higher in the medium term, but hostage to market volatility near term.
· Equities: Position squaring 
Asset allocation favours Europe, large vs small caps and defensive vs cyclical sectors in the near term.

· Credit: Flows into high yield mutual funds have been negative for three consecutive weeks pointing to further spread widening near term.
· FX: The recovery in commodity currencies looks on hold until after G-20.
· Commodities: The medium-term direction is still positive. After another awful week for markets, we would like to present our thoughts around a set of basic questions, acknowledging there is a lot we do not know. What happened? Is it real or just fear? Can the selloff become self fulfilling?

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