If the technical stars are aligned for a short-term bounce, China’s example may offer firmer grounds for optimism. Large-caps there have jumped nearly 11% from their bottom as the virus outbreak slows and government support ramps up. That’s a sign risk appetite can bounce back as sharply as it shrank, and suggests Chinese economic activity is starting to recover.

Of course, financial markets reflect new information much faster than economic data. With Italy attempting a nationwide lockdown and cases in Spain and the U.S. jumping, the impact on growth looks set to only widen.

Bloomberg Economics’ model, which uses both economic and markets data as inputs, is projecting 53% odds of a U.S. downturn over the coming year, the highest since after the global financial crisis.

But there’s a case traders have turned excessively pessimistic. Interest rates have been pricing in a 95% chance of a typical recession, high-grade credit 90% and equities 73%, according to JPMorgan Chase & Co.

Michael Strobaek, global chief investment officer at Credit Suisse Group AG, expects authorities in Europe and the U.S. to contain the outbreak and stave off recession. That would pave the way for stock-market confidence to build over the next three months onwards, he wrote in a note.

“Attention should then shift back to fundamentals such as equities’ attractive dividend yield, especially compared to sharply fallen bond yields,” Strobaek said.

This article was provided by Bloomberg News.

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