• With the energy crunch easing and China heading for a reopening bounce, the euro area will likely forego a widely anticipated winter recession. Yet the Fed’s fast monetary tightening is still to take its toll of a shallow US mid-year recession.
• These divergent shifts in the outlook support a tighter transatlantic yield spread, a slight preference for EA vs. US stocks and more upside for the EUR/USD.
• Overall, however, elevated valuations and persistent headwinds to earnings keep us favouring a prudent stance on risk assets amid mounting sings of exuberance. Euro area IG Credit still looks attractive.

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