REUTERS/Vivek Prakash
A man looks a screen outside a United Overseas Bank (UOB) branch in Singapore's financial district October 31, 2008. Singapore's second-largest lender UOB said quarterly results fell a bigger-than-expected 5 percent as volatile markets hurt non-interest income and warned the credit crisis will hit the real economy.
The firm released its latest global economic outlook, saying that worries over recent financial volatility are overdone and calm will return to the markets at some point in the near future.
That said, the world will be dominated by the three C's - China, commodities and central banks.
Here's a breakdown of the note, written by Joachim Fels and Andrew Balls:
- China - Pimco's "base case is for a more benign muddling-through, where the Chinese yuan depreciates gradually and mostly orderly." But this all depends on whether the huge capital outflows can be staunched before the country eats through its foreign exchange reserves.
- Commodities - Oil will rise, possibly taking other commodities with it. "Our commodity team presented a constructive baseline view where higher demand sparked by lower prices and, more importantly, ongoing supply rebalancing will likely take oil higher in the course of this year to around $50 (that said, we are cognizant of the risk of a renewed drop below $30 in the near term)."
- Central banks - While central banks are nearing the limits of what they can do to keep asset prices afloat, loose monetary policy "can still be supportive of asset prices, growth and inflation, even though the returns are clearly diminishing."
As a result, global growth will remain low but there isn't an imminent collapse on the horizon, according to Pimco. Here's their economic map of the world:
Pimco