"Tariff relief" fueling improved global growth estimates, BofA survey finds

Investing.com - Expectations for economic activity in the coming months has improved thanks to recent signs of thawing in global trade tensions, a survey of European fund managers conducted by BofA has shown.

The survey, which was conducted between May 2 and May 8, found that 59% of respondents expected the global economy to slow over the coming 12 months, down from 82% last month. An overall total of 208 panellists with $522 billion in assets under management participated in the study.

Meanwhile, the net proportion expecting a global recession has faded from a two-year high of 42% to near zero.

A so-called soft landing, in which the economy cools without slipping into an outright downturn, is now viewed as the most likely outcome. Investors had previously been bracing for a hard landing.

Crucially, the survey was taken before the announcement of a key trade agreement between the U.S. and China, which the BofA analysts suggested could mean that there is "scope for further improvement in global growth expectations".

On Monday, Washington and Beijing said they would lower and pause their respective elevated tariffs on one another, fueling hopes for a detente in an intensifying trade spat between the world’s two largest economies. Many economists had warned that the tariffs would spark inflationary pressures and weigh on growth, while several businesses have flagged that the tariffs had made it more difficult to plan out future investments.

Growth in Europe, in particular, is seen accelerating in the coming months because of the trade optimism and expectations for increased government spending in Germany, the BofA analysts said. Investors also have a more "sanguine" outlook for European inflation, with 28% "seeing scope" for prices in the region to decline.

Against this backdrop, 59% of respondents anticipate upside for European equities, up from 51%. A net 35% also said they are overweight European stocks relative to their benchmark, while a net 38% are underweight U.S. equities -- a two-year high.