Global markets not too stressed

Potentially robust second-quarter corporate earnings and more clarity on the state of European banks in the coming week should help calm investors stressed by a possibility of a double-dip recession.
World stocks, measured by MSCI, rose almost every day in the past week to a two-week peak, erasing losses suffered in late June after nervousness over European bank stress tests and weakness in the US economy fanned concerns that the world might slip into recession again.
However, sentiment improved in the week as early signs pointed to solid corporate earnings in the United States. Expectations also grew that the stress tests, whose results are due on July 23, are not likely to damage the financial industry.
This has prompted some investors to scale back their overly pessimistic view, although they are not in a rush to buy risky assets. "In the past three weeks we've downgraded our view in order to take into account the deteriorating state of the global economy. But we're not in a camp to expect a disaster," said Alain Bokobza, head of global asset allocation strategy at Societe Generale.
"There's no risk of a double-dip. A double-dip is too risky and that's not what policymakers want." Half of Societe Generale's multi-asset portfolio is invested in stocks - down from 65 percent in March. Bonds and credit make up a fifth of the portfolio, alternatives 15 percent and the rest is in cash.
Its proprietary economic news flow data show all indicators point to an expansion of the economy, although China is the only country where news flow is levelling off.
It expects 4 percent global GDP growth this year, which equals 20 percent earnings growth in 2010 and 2011.
Double-dips are a very rare event, happening just once - 1981 - in the past 90 years, according to Credit Suisse.
Thomson Reuters data shows the average US expansion lasts 38 months, which points that this leg of growth should have between one and two more years to run.
Next week's earnings include Alcoa, Intel, J. P Morgan, Google, Bank of America, GE and Citi. Thomson Reuters data shows earnings of S&P 500 firms are expected to grow 27 percent in the second quarter from the previous three months, after expanding at a rate of 58.3 percent in the January-March period. So far, with 26 of 500 firms already reported, 69 percent of earnings are coming above expectations.