Looking at H2, what is Habib Bank AG Zurich’s outlook on the global markets?
Global financial markets had a strong first half of 2024, but the second half of the year could become more challenging. The Fed may cut rates once, but as long as the US economy expands and inflation stays above 2 per cent, substantial easing is unlikely. Other major central banks may also slow their easing. The US equity market is expensive, and further rises require sustained earnings growth.
What key risks does the bank see in the global markets in H2 2024?
Disappointing corporate earnings amid stretched valuations could dent equity market performances. If lower earnings result from lower margins, cost pressures could signal a rebound of inflation, making central bankers nervous and ending any talk of Fed easing.
Political risks include renewed instability in the eurozone due to French elections and potential volatility from the US elections. The Japanese yen, undervalued currently, may cause global market reverberations if there’s a major policy shift by the Bank of Japan, although an internationally coordinated move seems unlikely.
From the bank’s perspective, what’s your take on the state of the GCC economies?
The GCC economies have been relatively stable, and efforts to reduce reliance on fossil fuels in the UAE and Saudi Arabia are likely to sustain economic expansion. Saudi Arabia is becoming a regional power with global reach. Opportunities are likely to abound, but so will poorly designed projects. Investments in private equity and infrastructure are areas investors should explore.
What is your take on the global energy market, and do you think OPEC+ nations will boost production soon?
OPEC+ policy has focused on maintaining a floor for crude oil by managing output. Significant production increases are likely only if strong global demand threatens market stability. While some adjustments are possible, sustained high oil prices (above $100/bbl) would enhance the attractiveness of alternative energy sources and accelerate the energy transition, which is disadvantageous to established fossil fuel producers.
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