LONDON - Investors have gone from bracing for a U.S. recession to positioning for the world's biggest economy to keep chugging along.
There are some signs of cracks: First-quarter growth came in well below expectations, as did April's employment figures. "We've gone from extreme optimism to extreme pessimism," said Aneeka Gupta, director of macroeconomic research at investment company WisdomTree. While the European Central Bank is expected to deliver a June rate cut, with inflation in the bloc at 2.4% in April, rate cut bets have also been pared back.
Oil prices increased sharply in March and April as fears rose about a broader Middle East conflict between Israel and Iran. Supply disruptions and a pick-up in global demand also played a part in a commodities rally, especially for copper. Stocks and the economy have a mercurial relationship: sometimes good U.S. data has boosted equities, other times it has dented them. Some strategists believe the jump in U.S. borrowing costs has yet to fully register.