Financial markets, by and large, have warmly welcomed initiatives by the world's richest nations on oil and the euro, which should strengthen global financial markets generally. Mr Kevin Gardiner, European equity strategist at JP Morgan in London, suggests financial assets, particularly equities, will do reasonably well for the rest of the year.
JP Morgan is now looking for a 10 per cent return on pan-European equities in the closing months of the year, up from a range of 5 to 10 per cent expected a month ago. Concerns about the price of oil, which brings with it the potential for higher inflation and lower growth, have been driving some investors to take refuge in cash positions.
Higher energy prices are inflationary and negative for bonds. They raise the cost of manufactured goods and potentially lead to higher wage demands, a particular threat in the US, given it is near full employment. Higher oil prices also pinch corporate profitability by raising raw material prices, while at the same time depressing consumer demand as drivers and homeowners reallocate funds to pay for fuel.
:quality(70)/cloudfront-eu-central-1.images.arcpublishing.com/irishtimes/VR3765MFOBH2NMV2QNICYDF67M.png)