Economic experts expect the global economy to deteriorate

Global equity markets are set to continue to hemorrhage currency as the selloff continues this summer as central banks around the world raise interest rates in an attempt to combat spiraling inflation.

Brunello Rosa, CEO and head of research at financial advisory firm Rosa & Roubini, believes central banks around the world will continue monetary tightening as markets continue to plunge, CNBC reported.

Rosa said: “Now is the time to reassess the economic fundamentals around the world in terms of growth. It’s hard for markets to be totally optimistic when inflation is rising, growth is slowing and interest rates are rising rapidly around the world.

Last Thursday, the Dow Jones Industrial Average plunged more than 1,000 points while the Nasdaq Composite fell nearly 5%. The 5% decline wiped out any gains from a short-lived rally the day before when the US Federal Reserve announced it would raise interest rates. The short-lived rally was spurred by investor optimism that the Federal Reserve had not implemented a larger rate hike, but that optimism quickly gave way to fears of smaller rate hikes in the course of the next few months.

Rosa suggested that investors were initially optimistic about the news of a 75bps hike but that the fact that there remains a strong possibility of several 50bps hikes over the next few months spooked investors. .

Rosa said: “It is clear that all [central banks] are talking tough at this point. But the reality is that many tightenings will eventually lead to economic contraction.

He also suggested that most European and American governments are naive to continue to suggest that economic contraction is avoidable.

He said: “In the euro zone and in the United States, they are far from realizing that there will in fact be some form of contraction in economic activity.”

Rosa said he expects the Russian invasion of Ukraine to last much longer than many investors expect, which will continue to exacerbate supply chain disruptions and inflation while adding fuel to the fire of rising interest rates.

The Stoxx 600, a pan-European stock index, fell 1% on Friday morning on the heels of Thursday’s sell-off on Wall Street. The Stoxx 600 is down more than 11% since the start of the year. In Asia, Hong Kong’s HangSeng index fell 3.81% and in mainland China, the Shanghai Composite fell 2.16% while the Shenzhen Component lost 2.14% of its value.