In a new report, HSBC analyst Fredrik Nerbrand named the firm’s top 10 market risks for 2016. Here’s a breakdown of the list.
1. U.S. Capex Recovery
In this scenario, U.S. labor markets will continue to improve leading to strong profits, higher capital spending, wage growth and further Fed tightening. Both European equity prices and global commodity prices would benefit.
2. Emerging Markets Capital Flows Spike
In China, structural reforms and loose monetary conditions will lead to a resurgence in demand for European goods. This scenario would be good news for emerging market assets and high-yielding currencies and commodities.
3. Policy Paralysis
Regulators see diminishing returns from market policy until they eventually become ineffective altogether, rendering regulators helpless to influence global markets. Yield curves would flatten, credit spreads would rise and stocks would fall.
4. Supply-Led Oil Price Increase
OPEC is near full production capacity, and the rest of the global oil producers are positioned for a major production decline in 2016, which means any unexpected production disruption could result in a spike in oil prices.
5. U.K. Votes For Brexit
The 2016 U.K. referendum results in the country leaving the eurozone. European large-cap stocks would likely benefit and volatility surrounding the referendum date would explode.
6. Periphery Issues Rise Again
Spain, Portugal and Greece continue…
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