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13 September (Reuters) – The global economy could avert a recession as data point to a possible soft landing, analysts at JP Morgan said, adding that the Federal Reserve was “overreacting” by raising interest rates by 75 basis points in July could have.
A raft of recent data from the major economies suggests inflation and wage pressures are set to ease and consumer confidence stabilize, the brokerage said in a note on Monday.
“The likelihood of a soft landing has increased as inflation and employment pressures moderate, while positioning remains at extreme lows,” the broker added.
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Among stocks, the energy sector is trading at a deep discount and offers a cheap investment opportunity, analysts say.
Brokerage is also bullish on China as the country eases COVID-19 restrictions and expands fiscal stimulus, boosting bets on risky assets.
Polls last week showed that Europe is almost certainly entering a recession as inflation is more than four times the European Central Bank’s target of 2%. The deepening cost-of-living crisis and bleak outlook are also holding consumers back on spending. Continue reading
But JP Morgan said it expected European governments to act to protect consumers from biting energy inflation as natural gas prices soar after sanctions-hit Russia cut supplies.
Corporate earnings in Europe are also “defying economic momentum,” JP Morgan said.
Data from the US Labor Department last month showed that consumer prices did not rise in July due to a sharp drop in the cost of gasoline, a sign of relief for Americans who have watched inflation hit levels not seen since has not been reached for four decades.
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Reporting by Niket Nishant in Bengaluru; Edited by Anil D’Silva
Our standards: The Thomson Reuters Trust Principles.
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