Perfect storm is brewing to capsize recent markets rally

We have seen a strong rally across financial markets in recent months, with both risk and safe haven assets making ground.

There have been good gains by stock markets, marked declines in bond yields, a rebound in oil prices and some recovery in emerging markets and their currencies.

The oxygen for the rally is being supplied by central banks via a further relaxation in monetary conditions. Ironically, a very weak US employment report for May, which followed on from less than stellar job growth in April, has been greeted positively in the financial markets.