Bear market bounce could be over soon (Apr 09)

The outbreak of swine flu has had little impact on financial markets, even in Mexico. While not wanting to downplay the social costs or uncertainty about how the disease might evolve, we think markets are right to remain sanguine for the time being. Nonetheless, there are other reasons why investors may choose to book profits on riskier assets after their recent gains. The rally in developed equity markets seems premature, as economic recovery is still a distant prospect and valuations are not especially attractive. The outcome of “stress tests” could also put banks under renewed pressure. What’s more, a renewed fall in global risk appetite would put emerging market assets back on the ropes.