Industry Sector Weekly by Lloyds

Equities fell sharply in the past week, as weak economic data – including the Chinese and US manufacturing PMI surveys – increased downside risks for global growth. Weak data and higher equity risk premiums

Equities fell sharply in the past week, as weak economic data – including the Chinese and US manufacturing PMI surveys – increased downside risks for global growth. Spain’s AAA rating was also placed on review for a possible downgrade by Moody’s. On the plus side, the ECB revealed that it lent eurozone banks €131.9bn in its 3-month tender, somewhat less than markets had anticipated.

As we will argue on the next page, uncertainty regarding the economic outlook has pushed equity risk premiums higher than during the height of the financial crisis. Equities in the coming months, therefore, could be driven more by changes to risk premia than by earnings surprises.