Risk assets consolidated yesterday’s gains overnight. The dollar failed to regain lost ground and Asian equities followed the S&P 500 higher. Respectable global manufacturing prints certainly helped, but the gradual easing of sovereign stresses in Spain and Italy probably played the greater role. We keep our cautious stance however, noting that European austerity measures are mostly only in their early stages of implementation, so there is scope for further deterioration in economic data as the process of fiscal consolidation begins to bite in earnest. At present, growth forecasts remain relatively conservative, and there is still some upside risk to our expectations of a recession in Europe in particular. Continue reading →