End of the Soft Patch In the Global Economy?

Global equity markets rallied in the final days of the second quarter as investors became increasingly confident that a default by Greece will not occur in the near term. This upturn reversed much of the quarter’s earlier losses that occurred in volatile markets buffeted by largely negative economic news and the significant tail risk of a financial market crisis in Europe.  Is this more than a relief rally – does it signal we are nearing the end of the “soft patch” of slowing growth in the global economy? The publication at the end of last week of weaker than expected PMIs for many countries (China, UK, the Eurozone) suggested we have not yet seen the bottom of the slowdown in global manufacturing.  (The PMI [Purchasing Managers Index] is a composite index combining data on the state of the manufacturing sector and confidence indicators.)  The US PMI for June was an important exception to this negative trend, registering a modest rebound, but the increase was mostly due to inventory accumulation.