China easing offers opportunities

Economics

• Two big shocks: Putin's invasion of Ukraine weighs on the economy, Chinese lockdowns remain a risk.
• Eurozone remains largely in stagflation until autumn. US economy loses momentum.
• A recession in Europe and the US is possible but not likely. The US Fed does not want a recession.

Equities

• Equities saw a slight recovery rally from mid-May onwards due to rebalancing flows and share buyback programmes.
• After a further decline in volatility, this should rise in Q3. Interest rate policy and Q2 reporting season are in investor focus.
• We remain neutral on equity exposure. Potential in China’s easing COVID-19 policy and Latin America.

Bonds

• Global bond markets burdened by rising interest rates and inflation concerns. Interest rate level increasingly attractive.
• Corporate bonds and emerging market bonds weighed down by China, Russia and recession fears.
• We underweight bonds and favour emerging market bonds. Duration: neutral.

Commodities

• Gold suffered from real interest rate hikes. With the Fed continuing to fight inflation, upside potential remains limited.
• US travel season supports oil demand. Supply remains tight and the oil market situation remains tense.
• Industrial metals suffered from China worries. China’s easing and recovery in the automotive sector should support.

Currencies

• Prospect of an imminent interest rate turnaround in the eurozone strengthens the euro. EUR/USD low probably reached in May.
• The US dollar continues to benefit from the geopolitical situation. However, there are doubts about the Fed's tightening course.
• The British currency is fluctuating around the 0.85 pound per euro mark and is thus at the level we expected.