03/08/2011
By Adam Cadle
Underlying economic trends in financial markets are continuing to deteriorate, therefore affecting market growth at a time when there is a particular focus on debt negotiations in Europe and the US, Baring Asset Management (Barings) has claimed.
This deterioration will continue for several months, Barings warned, as a result of rising inventory levels, the continued fiscal retrenchment of governments and a lack of job opportunities.
Barings head of asset allocation Percival Stanion said: “Global economic data continues to be both broadly weak and disappointing. The manufacturing strength that had powered the global economy out of recession appears to be petering out across north America, Europe and most worringly Asia.”
According to Barings short term deals in Europe and the US may stabilise markets temporarily but lack of a substantial solution to both problems is undermining business and consumer confidence.
Stanion added: “Recent activities in Europe have seen a deal to successfully ring-fence a Greek default from the rest of the Eurozone financial system agreed, but it offered no substantive debt relief to reduce the likelihood of a future default. It furthermore gives few clues as to how a market run on Italy might be approached. However, by transforming the European Financial Stability Fund (EFSF) into a multi-purpose slush fund, the guardians of the Eurozone appear to have done enough to cause investors to close down shorts and reduce underweights. While this half-baked deal may result in a temporary reduction in Eurozone risk premia, its ability to put an end to the sovereign crisis remains unproven and unlikely.”
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