The weakness of global equities and other risk assets in recent weeks has clearly been driven by the deterioration in the eurozone crisis, but that has not been the only factor at work. There has also been concerted weakness in economic activity indicators in all the major economies, while the central banks have been sitting on their hands. That is never a good combination for asset returns.
This week, however, the markets’ hopes have been rising that the major central banks are once again preparing to ease monetary conditions, if not via a formally co-ordinated announcement, then in a series of separate steps which would amount to a powerful monetary boost to the global economy. Although this policy change may take a couple of months to transpire, it does indeed seem to be on the way. The pause in monetary easing which became clear in February/March has once again proved to be only temporary. Read more