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Global stock markets likely to strengthen in next 6 months: UBS
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IANS | 17 Dec, 2018
Global Equity markets are more likely to advance than fall in the next
six months amid low risk of recession and attractive valuations, UBS
Global Wealth Management has said.
"Following the economic data
rather than the news headlines has proven a good strategy for navigating
the market over the medium term," Mark Haefele, chief investment
officer with UBS Global Wealth Management was quoted as saying by Xinhua
news agency on Friday.
Now, global equities trade on 15.5 times
of price-to-earnings (PE) ratio in comparison with long-term PE ratio of
18.3 times. In particular, equities in emerging markets have around 11
times of price-to-forward earnings ratio and 25 percent valuation
discount to peers in developed countries.
Monetary policy of US
Federal Reserve, escalation of trading tensions and poor market
sentiments could weigh on markets, according to UBS.
Though it's
rational for the Federal Reserve to slow down pace of interest rate
hikes, it may feel the need to display independence following recent
criticism from US President Donald Trump.
The Federal Open
Market Committee is scheduled to hold its regular meeting on Dec. 18-19
with Federal fund rate expected to be hiked by 0.25 percent.
"I
think the most likely case is for the Fed to continue to raise rates
three or four times in 2019. But it's also possible that if the economy
slows further that the Federal pause," said Barry Eichengreen, professor
of economics and political science with University of California,
Berkeley, recently.
The underlying rate of growth which comes
from the labor force growth and productivity growth is only 2 percent.
To avoid inflation and imbalances, the growth rate has to smoothly
decline from the 3 percent or so at which it's been running to 2 percent
which is the underlying potential growth rate, according to
Eichengreen.
The U.S. economic growth would fall to 2.3 percent
in 2019 from 2.9 percent estimated for 2018 and the Federal Reserve
would raise interest rates two times and pause in 2019, according to a
report by Morgan Stanley on Dec 7.
The yields of two-year and
10-year Treasury bonds are not expected to invert. Even such inverted
yield curves happen, it would not point to an imminent recession or bear
market, said the UBS.
Still, the inversion of two-year and
three-year notes against five-year Treasury bonds on Dec 4 jittered the
market with concern over impending recession of US economy.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
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66.20
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64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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