Are global growth fears overdone?

The world economy does not appear to be heading for a major slowdown, despite the weak Q2 GDP data from the euro-zone and Japan and some softer monthly indicators from China. The most reliable survey indicators of activity are reassuring and, while heightened geopolitical risks are weighing on sentiment – especially in Germany – global oil prices have actually fallen back. Nonetheless, we remain concerned that the relative strength of the US recovery and price pressures will prompt the Fed to raise rates sooner and further than the markets currently anticipate, regardless of the global fall-out.