Tame 2010 with mid-year global volatility likely; positive GDP in Asia Pacific: S&P

The upheaval in the financial markets at the end of 2008 led to an extremely rough first few months of 2009. In comparison, Standard & Poor's says that it expects 2010 would get off to a much tamer start.

According to its the commenatry titled, Top 10 Expectations For Global Corporate Credit Markets In 2010, Standard & Poor's sees 2010 as a turning point, characterised by overall prudence among market participants amid a tepid recovery in mature economies and guarded optimism among emerging markets.

For 2010, Standard & Poor's expects incremental improvement in macroeconomic fundamentals, ongoing repair in the financial sector, and a cautious revival in the non-financial sector. "Nevertheless, we expect some potholes on the road to the 'new normal,'" cautioned Diane Vazza, head of Standard & Poor's Global Fixed Income Research Group.

"For example, we think there will be bursts of volatility, particularly in the second half of the year as some of the emergency government support provisions approach their expiration date. In fact, we would not be surprised to see a partial retreat from 2009's strong rally in risky asset values," observes Vazza.

Given that much of the improvement stemmed from unconventional government policy measures, the private sector's effectiveness in taking over the reins from government as the primary engine of growth for the world economy remains a critical determinant of 2010's outlook.

S&P's outlook for 2010 is far from rosy, as it believes additional risks might emerge from other key external variables, including geo political events and oil prices.