IMF Estimates Still too Rosy as Global Growth Slows

19 April, 2016

FX News Today

European Outlook: Global stock markets recovered yesterday in tandem with oil prices and Asian markets followed suit with Japan in particular staging an impressive rebound. The Nikkei is up nearly 3.5% and the Topix gained nearly 3% after yesterday’s steep decline. The front end WTI (USOil) future is slightly off earlier highs, but still just shy of the EUR 40 per barrel mark and the weaker Yen helped stock markets to recover in Japan. Mixed U.S and UK stock futures are painting a more cautious picture although the DAX is higher ahead of the official opening. The local calendar has German ZEW investor confidence, seeing improving slightly amid the general recovery in risk appetite, as well as Eurozone current data and the latest ECB bank lending survey. The UK remains focused on the Brexit debate.

 IMF Estimates Still too Rosy as Global Growth Slows: The IMF’s recent world growth downgrades left 2016 estimates that are still too optimistic given the ugly Q1 performance for both the developed and emerging economies. The market’s early-year panic alongside the winter oil price plunge proved partly justified, though most of the year’s bad news is hopefully behind us. We expect a modest 2016 undershoot of IMF growth estimates across all the major countries and regions except Canada and the U.K., Brexit risk aside, before an improved trend into 2017.

Fedspeak: The Fed’s Kashkari said Chair Yellen is open-minded in her policy approach. The comments are from an interview posted on the Minneapolis Fed’s website. He noted the various challenges facing policymakers, including a slowing in China which has caused shocks around the world, and Brexit. And he added the Fed of course has a “de facto, huge global influence,” and is aware of its impact on world economic developments (it’s part of the Fed’s calculus). He thinks the existing structure of the Fed is working well. There wasn’t anything new or especially market moving in his remarks, especially since the FOMC is universally expected to be on hold at next week’s meeting.

ECB’s Knot: Realistic to think rates won’t rise for a while. The Dutch central bank head said at a conference in The Hague that “for the short term its realistic to think the interest rate won’t rise”, although he warned home buyers to take possible increases in the future into account. It’s hardly a surprise that the ECB is not thinking about rate hikes at the moment, but Knot is right of course to remind consumers that in the long run rates will go up again. The last thing the ECB needs is a real property bubble and excessive risk taking in the mortgage market.

Main Macro Events Today 

US Housing Starts: March housing starts data is later today and should reveal a slight headline increase to 1,185k (median 1,170k) from 1,1798k in February. Permits should be 1,200k from 1,177k in February and completions are seen at 1,040k in March from 1,016k in February. There is some upside risk to the data as construction employment remained firm in March and the NAHB remained stable.

German ZEW:  German ZEW investor confidence is expected to have recovered somewhat, in line with the stabilisation on markets and we are looking for a rise in the expectations reading to 7.0 (med 8.0) from 4.3 in the previous month. Confidence data nevertheless is pointing to a gradual loss of momentum in core Eurozone countries including Germany, with the second quarter likely to look weak in comparison to the first quarter.

A weaker Yen & Stronger Kiwi today12 Feb, 2020  

The Yen remained soft while the Dollar bloc currencies extended recent gains as risk appetite in global markets held up, with a reported dip in new...

ECB in focus as trade tensions ease26 Jul, 2018  

European Commission President Juncker and US President Trump agreed to suspend new tariffs during the negotiations which aim to lower barriers to transatlantic...

Long yields continue to climb10 Jul, 2018  

Nikkei gained 1.09% after a strong close on Wall Street and with the earnings season starting to overshadow lingering trade jitters at least for now. A weaker...

Stocks opened lower on trade tension6 Apr, 2018  

U.S. trade tariffs tightened market conditions. Coeure said that “while the effects of any tariffs on output and inflation may take time to materialise, falls...

Stock markets mostly moved higher16 Feb, 2018  

China and Hong Kong alongside other markets were closed for Lunar New Year holidays, which muted trading, but the Nikkei gained 1.19%...

Dollar traded mostly softer13 Feb, 2018  

The U.S. currency has been correlating inversely with global stock market direction of late on the causation that risk-on phases have seen investors...

US durable goods rebounds25 Dec, 2017  

U.S. personal income rose 0.3% in November with spending up 0.6%. The 0.4% increase in October income was not revised. The 0.3% spending increase..

FOMC meeting is front and center this week11 Dec, 2017  

The FOMC meeting is front and center this week following the solid November jobs report on Friday, which provided the final bit of cover for...

Oil prices are down28 Nov, 2017  

Asian stock markets headed south again, as declines and energy and mining stocks led shares lower amid a further drop in metal prices. Concern China’s regulators may limit the flow...