4 Developments to Watch in Global Economy. Carnegie Endowment for International Peace, Carnegie–Tsinghua Young Ambassadors Program. Appropriately, signals from the Fed and other central banks convey that monetary policy will remain supportive in the foreseeable future, especially given low inflation readings. The Real Economy: Production stabilizing but final demand remains weak, Financial Markets: Credit conditions continuing to ease. Global equity markets rallied sharply last week, buoyed by robust corporate earnings and signs that the housing market is starting to stabilize. Yet their implications could be quite consequential, both for 2018 and beyond. This is reflected in rising loan default rates. In the credit market, the 3 months LIBOR-OIS spread -- the premium over expected central bank interest rates that commercial banks charge each other, which serves as a gauge of banks’ reluctance to lend -- continued its decline to 0.31 percent, 0.69 basis points below its value from the previous week and 6.25 basis points below its value from a month ago. The U.S.’ Dow Jones and NASDAQ rose by 4.0 percent and 4.2 percent, respectively. Mohamed A. El-Erian is a Bloomberg Opinion columnist. The global economy still appeared to be growing at above‑trend rates, although recent developments were likely to have increased downside risks around global growth to some degree. In emerging market economies, indicators of growth had continued to soften and financial conditions had tightened further, in some cases markedly. He is president of Queens’ College, Cambridge; chief economic adviser at Allianz SE, the parent company of Pimco where he served as CEO and co-CIO; and chair of Gramercy Fund Management. The U.S housing market showed some signs of recovery last week, with housing prices experiencing the smallest decline in 10 months; prices ended the month of May 5.6 percent lower than they were the same time last year, but having risen 0.9 percent since the month before. Have a confidential tip for our reporters? In his semi-annual congressional testimony, Federal Reserve Chairman, Ben Bernanke noted that while the worst housing downturn in eighty years appears to be moderating, the Fed still expects the economy to remain vulnerable to shocks. The UK’s FTSE 100 and Germany’s DAX gained 4.3 percent and 6.4 percent, respectively, while Japan’s Nikkei 225 was up modestly by 5.8 percent. The MSCI World Index and the MSCI Emerging Markets Index last week added to the previous week’s gains to take the year-to-date returns to 11.7 percent and a massive 45.3 percent, respectively. His books include "The Only Game in Town" and "When Markets Collide.". Helped by monetary and fiscal stimulus, as well as by the need to rebuild inventories, various production indicators continued to show improvement last week. Surveys of business activity in the Eurozone showed an improvement in July across both manufacturing and service sectors. U.S. wage growth, at a 2.5 percent annualized rate in November, is still relatively low, especially given the decline in the unemployment rate to a 17-year low. If you enjoyed reading this, subscribe for more! Helped by monetary and fiscal stimulus, as well as by the need to rebuild inventories, various production indicators continued to show improvement last week. Global demographics are always shifting, but the population tidal wave in the coming decades will completely reshape the global economy. Despite those qualifications, last week's developments reinforce the prospects for better actual and future growth, thereby increasing the possibility of improved fundamentals validating notably elevated asset prices.

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