Continuing the trend of late-2015, the first quarter of 2016 was once again dominated by market volatility. After the first interest rate hike by the US Federal Reserve in December 2015, markets began 2016 weaker, fuelled by global growth concerns, particularly in emerging markets and China and the effectiveness of central bank policy to deal with this. As a result, government bond yields finished the quarter lower, while equities were mixed.
Global central bank easing was also a theme during the March quarter, with the Bank of Japan moving interest rates into negative territory, the European Central Bank easing monetary policy across multiple fronts and the Fed’s FOMC revising its ‘dot plot’ downwards. Other central banks to also ease interest rates over the quarter were the People’s Bank of China, Reserve Bank of New Zealand and Sweden’s Riksbank.
Despite ongoing concerns over the medium-term outlook, there is something interesting now happening in China. Since 2014, median economic growth rates have been falling, however in the last few weeks, several economists have begun to upgrade their growth forecasts. In the research essay this quarter, James White discusses the outlook for China and the drivers of this growth. He also considers how the country has been addressing the various structural challenges it has faced, including the property markets, debt and capital flows.
You will find all of our usual analysis via our chart packs and updated forecasts which I trust will provide you with some useful insights into the global economic outlook. If you have any questions or feedback, please do not hesitate to get in touch.
– Stephen Halmarick, Head of Economic and Market Research
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