CNBC_Logo
EXCERPTS FROM:
Citi: World economy seems trapped in ‘death spiral’
Katy Barnato | Friday, 5 Feb 2016 | 11:05 AM ET

The global economy seems trapped in a “death spiral” that could lead to further weakness in oil prices, recession and a serious equity bear market, Citi strategists have warned.

Some analysts — including those at Citi — have turned bearish on the world economy this year, following an equity rout in January and weaker economic data out of China and the U.S.

“The world appears to be trapped in a circular reference death spiral,” Citi strategists led by Jonathan Stubbs said in a report on Thursday.

“Stronger U.S. dollar, weaker oil/commodity prices, weaker world trade/petrodollar liquidity, weaker EM (and global growth)…and repeat. Ad infinitum, this would lead to Oilmageddon, a ‘significant and synchronized’ global recession and a proper modern-day equity bear market.”

Stubbs said that macro strategists at Citi forecast that the dollar would weaken in 2016 and that oil prices were likely bottoming, potentially providing some light at the end of the tunnel.

“The death spiral is in nobody’s interest. Rational behavior, most likely, will prevail,” he said in the report.

Crude oil prices have tumbled by around 70 percent since the middle of 2014, during which time the U.S. dollar has risen by around 20 percent against a basket of currencies.

Overall, advanced economies are mostly making a modest recovery, while many emerging market and developing economies are under strain from the rebalancing of the Chinese economy, lower commodity prices and capital outflows.

Stubbs added that policymakers would likely attempt to “regain credibility” in the coming weeks and months.

“This is fundamental to avoiding a proper/full global recession and dangerous disorder across financial markets. The stakes are high, perhaps higher than they have ever been in the post-World War II era,” he said.

Just 151,000 new jobs were created in January in the U.S., in the latest sign that the world’s biggest economy is slowing. Economists are concerned about an industrial or manufacturing recession in the country, following some warnings from companies in earnings seasons and recent weak manufacturing activity and durable goods orders data.

“Many markets are now pricing in a significant probability of recession and when we talk about recession, we’re talking particularly about a U.S. recession. Do you think that is likely or not? To me, the odds are too high; the market is pricing too high a probability,” Myles Bradshaw, the head of global aggregate fixed income at Amundi, told CNBC this week.

These articles are provided for informational purposes only and were obtained from publicity available sources on the Internet. These articles do not constitute financial advise or trading recommendations by Global Asset Management ("Global"). Global neither warrants the accuracy or completeness of the information contained in these articles, undertakes to update them, nor is it responsible for any omission or error contained in these articles. Viewers are encouraged to conduct, and should only rely on, their own independent research.
The purchase or sale of precious metals involves substantial risk and volatility. If you are contemplating purchasing and/or selling precious metals, you should consult with an independent financial advisor to learn about the inherent risks. Global does not render, and nothing in this website should be construed as, financial advise, a trading recommendations or a solicitation for the purchase or sale of precious metals.
 
 

Daily Chart : Gold

Daily Chart : Silver

Daily Chart : Platinum

Daily Chart : Palladium

 
 
 

Copyright © 1996-2015 Global Asset Management. All rights reserved.

2425 Hollywood Blvd. Suite 100. Hollywood, Florida 33020 :: info@globalam.net

Phone: 954.921.1021 :: Fax: 954.921.1536 :: Toll Free: 1.888.421.1021