5 Risks, Like Financial Contagion, Underappreciated by Mkts: BNP
Risk of financial contagion, profit recession “probably underappreciated” by markets as attention stays on things like oil prices, Russia, Europe QE and “Grexit,” BNP Paribas strategist Gerry Fowler writes in note.
- Permanent losses of capital could have ripple effects, “seem increasingly likely in some EM investments let alone some DM markets like Greece”
- It’s possible U.S. earnings growth will be zero or negative this yr as global cos. experience currency/commodity volatility simultaneously
- More important than ECB buying EU sovereigns would be whether they buy lower-quality securities and whether some core EU govts begin structural reform
- Republicans controlling U.S. House and Senate could lead to “aggressive” austerity effort in U.S.
- EM supply/demand imbalance: pipeline of issuance may slow while sovereign-wealth fund demand will persist; EM assets might find “dwindling stock of sellers”