>GLOBAL SCENARIOS: Fighting Gravity (DANSKE MARKETS)

■ Our forecasts for the global economy are left broadly unchanged. We continue to look for strong growth in the short term and expect business surveys to continue higher. Our growth forecast is still slightly higher than consensus – but less so than three months ago.

■ From Q2 10 we project a gradual slowdown in growth as the boost from the inventory cycle and policy stimulus fades. The global recovery should prove sustainable, though, with growth slightly above trend into 2011.

• Strong recovery to continue in the near term
• Risk of slower growth by mid next year
• Job creation is key for a sustained recovery
• Central banks remain accommodative

■ Labour market improvement is key for restoring confidence and sustaining the recovery. We look for a peak in unemployment in both the US and Euroland in Q1 10. If confidence takes hold there is a lot of pent-up demand to be unleashed – especially in the US.

■ A key risk to our scenario is a setback in confidence that takes the economy back into a negative feedback loop where employment and investment fails to come through. Testing times are approaching for sustainability and hence markets may become more jittery.

■ Deflationary pressures in the developed world will continue to be stronger than inflationary pressures.

■ Monetary policy will stay loose for a long time. Liquidity measures will start to be phased out gradually. The ECB will hike before the Fed as ECB is more concerned about sowing the seeds for new excesses in the financial system. China is expected to resume CNY appreciation in spring 2010.

To read the full report: GLOBAL SCENARIOS