Tim Fox

In the euro zone, some are talking about the return of the 2011-12 'doom-loop' in which euro zone banks and sovereign states were negatively entwined.

Significant questions still remain about the outlook, even as some of January’s concerns appear to have abated.

Some Chinese economic indicators have undoubtedly been soft, but others too have shown that far from collapsing, the Chinese economy is actually achieving something of a soft landing.

This year is still expected to be a challenging one in the GCC, with low oil prices, uncertain geopolitics and higher US rates weighing on the macroeconomic outlook.

The markets are starting to expect some concrete easing steps to be taken by the European Central Bank as early as the council meeting on December 3.

It is still possible to construct a more favourable end to the year, with the key elements to watch being developments in China, the nascent recovery in risk assets and ultimately the US Federal Reserve.

The window of opportunity for the US Federal Reserve to act this year has now got smaller, leaving it dangerously exposed and boxed in should events turn even more difficult through the final quarter.

With the US economy clearly performing very well currently, the main obstacle to a rise in interest rates would appear to be the situation in financial markets.

The world has been waiting for the Fed to lift interest rates for too long now, with the consequence that many investment decisions have not been taken, or put on hold.

While the Greece crisis has resembled a slow motion train wreck playing out over a number of months, if not years, the collapse in Chinese equities has taken the markets much more by surprise.

Not only is the market probably wrong in assuming that the Fed will stay on the sidelines in the second half of the year, but the Fed itself is probably even too relaxed about where rates are likely to go.

As the largest and most liquid market in the Mena region, there is understandably significant interest in and excitement about this event, and for economic reasons the decisions is also timely.

Regionally, the oil price decline in January probably also affected sentiment, despite the best efforts of policymakers to reassure that government spending would continue regardless.

This downgrade occurred when oil prices were already heading higher, which they have done since the beginning of April.