Financial markets have been dominated by the fallout from the banking sector turmoil in March. The problems at Silicon Valley Bank and Credit Suisse were more a consequence of poor management than a broader fragility in the global banking system, but it has still unsettled bond and equity investors.

It has also prompted a reappraisal of interest rate expectations. Bond markets now expect the Federal Reserve to cut sooner. They believe banks are likely to rein in lending, which will slow economic growth and give central banks greater flexibility on future rate rises.

The impact for stock markets is not yet clear. They remain trapped in a holding pattern, waiting for greater clarity on interest rates. It is possible to build a gloomy or optimistic scenario. While inflation still looks sticky and some economic weakness appears inevitable, China’s reopening is fuelling growth and a degree of bad news is already priced into markets.