Global Earnings Recession Risk

Commentary
Markets have recovered massively in January, boosted by lower inflation and optimistic estimates of growth. The Chinese recovery is a key factor for this optimism, as well as the relief in European sentiment as the euro area may escape recession. These are factors that may prove to be a mirage for markets. All this news may reduce the risk of recession, but not the reality of stagnation.
Lifting Europe from deep recession to stagflation because of a mild winter isn’t a bullish signal. Furthermore, the Chinese reopening certainly helps the insipid global growth outlook, but it may also perpetuate elevated inflation. We can’t forget that the widely cheered inflation figure of November and December comes from weaker global demand for commodities, and the Chinese reopening means a huge boost to oil, coal, natural gas, and copper demand in a moment where inventories remain below the five-year average….