A new survey of European fixed income investors finds that most now see a high risk of a double dip recession.
The survey, carried out by Fitch Ratings, finds that 70% of investors now believe there is a high risk of a double dip recession compared to 40% in the previous survey, which was completed at the end of the second quarter; and 21% who saw that risk, at the end of the first quarter.
“With much of world growth dependent on emerging market dynamism, this sharp swing in sentiment partly reflects investor concerns over recent signs of a slowing in many of these emerging economies,” said Monica Insoll, managing director in Fitch’s credit market research group.
Respondents expressed a more negative sentiment on the outlook for fundamental credit conditions in the emerging market sovereign sector than in Q3, with 41% of respondents now expecting deterioration, up from 32%. More than one-third of survey respondents (36%) also said EM sovereign credit quality is over-stated and at risk of crisis.
“Fitch’s baseline global economic forecasts do not project a double dip scenario, but the risk of recession has increased given current intensified financial market volatility could drive risk aversion further, which in turn would lead to tighter credit conditions,” says Maria Malas-Mroueh, director in Fitch’s sovereign team.
The survey, completed on October 31, represents the views of managers of an estimated US$5.8 trillion of fixed income assets.