The backdrop for stocks is as muddy as ever — and that’s great news, says this banking giant

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Look around and that long awaited recession just hasn’t come, not in the U.S., and not many other places either, with the International Monetary Fund on Tuesday saying it was no longer forecasting a recession in the U.K.

“In the face of powerful shocks –including the continued effects of the Russia-Ukraine war, high inflation, surging central bank policy rates, and (more recently) the emergence of banking sector stresses — the global economy continues to move forward,” says Nathan Sheets, Citi’s global chief economist, in a note forecasting 2.4% global growth this year and 2.1% next year.

Another banking giant, HSBC, arrives at a similar conclusion about the economic backdrop — and that is the basis for its optimistic take on stocks and other risky assets.

“Continued subdued sentiment and positioning is just one of many factors that keep us risk-on in our tactical asset allocation,” say strategists led by Max Kettner, chief multi-asset strategist at the bank.

Here’s its argument. Looking at purchasing managers index data for manufacturing, new orders minus inventories for key areas including the U.S., the eurozone, Taiwan and Sweden are improving. Financial conditions also have improved, thanks to falling volatility, a declining U.S. dollar, a dip in U.S. Treasury yields and stabilization in credit spreads.

That’s not to say the strategists expect growth to suddenly accelerate — they acknowledge weakness in regional Fed surveys, for instance. But that’s actually the good news. “The fact that the global growth backdrop is certainly better than many had feared, but not sounding an all-clear results in a goldilocks environment,” says the HSBC team.

Another point the bank makes is that consensus still expects a recession, just later, and in fact deeper than before. That applies to earnings as well, with expectations of flat quarter-on-quarter earnings per share growth from S&P 500

companies in the second quarter. “So given such subdued expectations, we feel comfortable with extending our risk-on view into the second half. The bar to beat pessimistic expectations remains low,” the firm says.

The weaker dollar

should help U.S. earnings, and activity surprises will help earnings per share revisions as well.

HSBC is particularly bullish on eurozone equities given low growth expectations. The bank’s worry around the debt ceiling isn’t that a deal won’t be reached, but the possible market reaction to one.

“Of course with the recent rally in risk assets, the air is getting thinner – something that also our machine-learning models are currently indicating,” the firm says. “For example, any relief rally on a potential U.S. debt ceiling deal could be used to tactically decrease exposure in risk assets more broadly, and wait for better re-entry points (given the likely liquidity drain following any potential deal).”

Related: Who will buy deluge of Treasury bills after a debt-ceiling deal

The market

U.S. stock futures


are lower, after the worst single session for the S&P 500

since May 2. U.K. bond yields

rose after U.K. inflation at the core level was far stronger than expected.

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The buzz

Nvidia earnings

are due after the close. Buoyed by hopes for artificial intelligence demand, the chipmaker’s stock has more than doubled this year, and the company now sports a bigger market cap than Berkshire Hathaway.

The minutes from the May Federal Open Market Committee meeting are due at 2 p.m. Eastern, with attention on how committed the central bank was to pausing after a quarter-point rate increase.


may pick India as a site for its next factory, CEO Elon Musk said.

Kohl’s shares

rallied as the department-store operator unexpectedly posted a profit as comparable-store sales fell 4.3%.

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and Google

The new Warner Bros. Discovery

streaming service named Max experiences login troubles as well as a mockery on its first day.

Top tickers

Here were the most active stock market tickers as of 6 a.m. Eastern.


Security name



Anheuser-Busch InBev


AMC Entertainment


Palantir Technologies



Mullen Automotive

The chart

Bank of America says the reopening of the Chinese economy still has seen “patchy” growth, and that it has been too slow for a sustained rally in copper. “In China, new order/inventory ratios, a forward-looking indicator, are back at levels that imply flat copper quotations [year-over-year]. It’s the same story with the credit impulse, which has picked up from the lows but still highlights the selective nature of official support to the economy,” said analysts led by Michael Widmer. The front-month copper contract

has dropped 5% this year.

Random reads

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