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Global Economic & Market Outlook

• We remain confident that the global economy is on track for a continuation of yet another year of robust growth performance despite the noticeable slowdown in the US, as the Euro area and Japan rebound and China and India continue to lead growth in emerging markets.
• However, we believe that downside risks are currently more threatening than three months ago. Particular concerns include the outlook of personal consumption in the US, as the labor market starts to cool off and employment growth is decelerating, leaving consumers more exposed to negative wealth effects originating from the continuing housing market downturn and the recent collapse of the sub-prime mortgage market.
• Although an outright recession in the US does not seem to be the most likely outcome, our analysis suggests that the probability of a severe slowdown of the US economy to a growth rate below 1.6% y-o-y increases significantly to 50%.