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IMF: Growth is worse but at least uncertainty is lower

IMF lowers 2019 global growth estimate for the sixth straight quarter

IMF lowers 2019 global growth estimate for the sixth straight quarter
2019 is over but the outlook for growth keeps getting worse. The IMF lowered its 2019 global growth forecast to 2.9% from 3.0% in October. It was the sixth consecutive cut to the 2019 outlook.
The 2021 forecast was also lowered to 3.4% from 3.6%.
On the upside, the IMF maintained its 2020 GDP forecast at 3.3% and said that economic uncertainty is diminished with risks “less skewed” toward negative outcomes, albeit still tilted to the downside.
The big loser in this round of forecasts was India with the 2020 forecast cut to 5.8% from 7.0% on declining credit growth.
Other highlights:
  • 2020 Eurozone GDP seen at 1.3% vs 1.4% in Oct due to manufacturing contraction in Germany
  • Boosts China 2020 GDP to 6.0% from 5.8% on trade deal
  • Cuts 2020 US GDP to 2.0% from 2.1%
  • UK forecast unchanged at 1.4%
For me, these forecasts don’t have much value on their own (as you can see from the frequent revisions) but they are a valuable way to visualize and interpret the evolving growth picture.

IMF trims 2020 global growth forecast to 3.3% from 3.4% previously in October

IMF attributes the slight downwards revision to a sharper-than-expected anticipated slowdown in India

  • Sees tentative signs that manufacturing and global trade are bottoming out
  • That is partially due to the US-China trade deal
  • Sees risks less tilted to the downside than in October
  • US-Iran tensions, social unrest and a flare-up in trade tensions are key concerns
  • 2021 global growth forecast seen at 3.4% (3.6% previously)
  • US 2020 growth forecast seen at 2.0% (2.1% previously)
  • China 2020 growth forecast seen at 6.0% (5.8% previously)
  • Euro area 2020 growth forecast seen at 1.3% (1.4% previously)
  • UK 2020 growth forecast seen at 1.4% (unchanged)
  • India 2020 growth forecast seen at 5.8% (7.0% previously)

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OPEC’s Barkindo reportedly confirms next OPEC+ meeting to be held in March

RIA reports, citing remarks by OPEC secretary general Barkindo

Barkindo

It appears that Barkindo has shot down rumours of the OPEC+ meeting potentially being postponed to June, with the headlines also saying that none of the OPEC+ members had asked for a different time for the meeting.

In any case, it’s only the end of January now. Two months is an extremely long time in OPEC world so just be mindful that they could still easily change their minds on this.

New coronavirus outbreak spreads to Beijing, Shanghai

Chinese state media confirms its first reported case for Shanghai

Virus

Meanwhile, Beijing reported two confirmed cases hours ago as the number of people infected by the new virus in China having more than tripled since the weekend.

For some context, the infection – which happens to be a strain of coronavirus, leading to cases of pneumonia – first appeared in Wuhan last month.
If you’re wondering why this sounds familiar, it’s because the Sars virus is also a strain of coronavirus and health officials in China have so far said analysis of the genetic code of the new virus closely resembles that of the Sars virus.
This may not be something that has a direct influence on markets but just be wary that fear can take shape in many different ways. The ebola virus outbreak case back in 2014 serves as a good reminder of that, causing the equities market to shudder a little.
So far, outside of China there have been one confirmed case in South Korea, two in Thailand, and one in Japan – with regards to the new virus.

Reminder: US markets are closed today

It is Martin Luther King Day in the US

MLK

Major currencies are continuing to trade in a rather subdued manner today and may yet carry on later in North American trading, as we observe a long weekend in the US.
Liquidity conditions are expected to stay thin and with Wall St not offering any direction for investors to latch onto, trading sentiment remains rather indecisive to start the week.
The pound has been the notable mover so far in the European morning but it isn’t too big a move as the currency stays pressured ahead of the BOE meeting next week.
Meanwhile, European stocks are more mixed with some slight weakness but are keeping near flat levels overall. That isn’t lending to much direction in the risk mood with USD/JPY still resting at 110.17, trapped in a 17 pips range so far today.