Global share markets to remain strong: BT

Global economic growth remains strong, and Australia is likely to perform on par with overseas markets in the coming quarter, according to BT chief economist Chris Caton.

With a few caveats, including the ever-present risk of a hard landing for the US economy, the threat of a US recession and continued flattening of housing prices in Australia and abroad, Caton remained upbeat as he delivered his quarterly global economic and market outlook.

He referred to the global share market stutter at the end of February, precipitated by the 9 per cent Shanghai market fall that flowed on to a 3 per cent drop in the US market and a similar decline in Australia.

“Equity markets have been overvalued for some time. The overvaluation reflected too great an appetite for risk É on the part of investors.

“It is important to point out that the drop had very little to do with any change in fortune for the Chinese economy,” Caton said.

Looking at a Bloomberg graph showing annual Australian share market performance, he indicated that the late February fall did not even register.

Caton said he thinks gains of between 6 and 10 per cent for international shares are likely over the next 12 months.

His primary concerns revolve around the US, particularly the risk of a sharp, sustained economic fall.

“I continue to think the consensus forecast that the US economy will experience nothing more than a soft landing this year may yet prove too optimistic.

“This may be the biggest ongoing risk to share markets,” he said.

Looking at the Australian situation, Caton said he agrees with the consensus view that the Reserve Bank of Australia will not raise official interest rates again in the near future.