New York: As global stock markets crashed this week over US recession fears, Goldman Sachs Group’s economists have increased the probability of a US recession in the next year to 25 per cent from 15 per cent. They, however, said there are several reasons not to fear even after unemployment jumped.
Goldman economists, led by Jan Hatzius, were quoted as saying in media reports that we continue to see recession risk as limited. “The economy continues to look fine overall, there are no major financial imbalances and the Federal Reserve has a lot of room to cut interest rates and can do so quickly if needed,” they added.
The US jobs data last week showed a slump in hiring and a three-year high in unemployment. There are also fears that the US Fed has “waited too long” to cut interest rates.
The analysts expect the Fed to cut benchmark by 25 basis points (bps) in September, November and December. The economists are skeptical that the US labor market is “at risk” of deteriorating rapidly. They said this because job openings are indicating that demand remains solid and there has been no obvious shock to spark a downturn, the report added.
Meanwhile, the Indian stock market pared its losses well compared to its Asian peers. According to experts, after the twin jolts from US recession fears and the unwinding of the Yen carry trade, stock markets globally are slowly limping back to stability. The message from the Bank of Japan that “rates will not be hiked when markets are unstable” will help in stabilising the Yen and prevent further massive unwinding of the Yen carry trade.
Most of the markets in Asia remained bullish. Tokyo, Shanghai, Bangkok, Seoul and Jakarta traded on a bullish note.
