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Published on 16 Oct 2008
Thursday 16 October 2008 - UBS Morning Economic Comment: Fears of recession loom
Presented by amit kara
+ The euphoric response to the policy initiatives have more or less evaporated across a range of markets as Fed Chairman Bernanke provided an exceptionally downbeat outlook of the US economy. The S&P 500 ended 9% lower and the Nikkei was down 10% this morning. The Nasdaq index has dipped below the lows of last Friday.
+ The US economy, along with the euro area and the UK will suffer a recession but we expect this to be short by historical standards. The various global initiatives by policy makers will help and going forward the ECB and the Bank of England, among others, still have plenty of room for policy rate cuts. The Fed can also cut policy rates and if they reach the zero bound, there are a range of unconventional measures available to it.
+ The data calendar is light in Europe. Over in the US we get CPI inflation which on the core measure is set to stay unchanged at 2.5%. Looking ahead, we expect inflation to fall across a range of countries such that by the middle of next year inflation in the US, UK and the euro area could be less that 2% y/y. With oil dropping to $73, the risks are very much on the downside.
+ Apart from that we get from the US the usual weekly jobless claims data and also the Philadelphia Fed's October survey results.