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The US is still outperforming its competitors in global markets, but a rising dollar and the prospect of Donald Trump being re-elected could change that
- The US economy has far outgrown other developed economies, especially Japan and Europe. The strength of the dollar is concerning, though, as is President Donald Trump’s fiscal stewardship
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On Tuesday the euro zone, which has supplanted China as the main source of concern about the health of the global economy, received a much-needed boost following the publication of data that showed the bloc expanded by 0.4 per cent quarter on quarter in the first three months of this year.
Not only was the euro-zone’s growth rate twice the pace in the final quarter of last year, it stemmed partly from an unexpected rebound in Italy – the most vulnerable of Europe’s largest economies – which grew by a stronger-than-expected 0.2 per cent, having slipped back into recession at the end of last year.
In China, meanwhile, the profits of industrial firms grew almost 14 per cent in March, following four straight months of contraction. Manufacturing output, while having slowed last month, is also back in expansion territory as a series of stimulus measures enacted since last summer start to bear fruit.
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Yet, in financial markets, it is America that is outshining the rest of the world, leading to a revival of last year’s “divergence trade” in which international investors bet on the continued outperformance of US assets relative to those in Europe and emerging markets.
Since the beginning of this year, the Nasdaq Composite, America’s technology-heavy equity index, has surged more than 21 per cent. On Monday, the index reached a new all-time high. On Tuesday, the benchmark S&P 500 index, which is up 16.5 per cent this year, hit its own fresh record high.
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