IMF cuts its economic forecasts again

IMF cuts its economic forecasts again 981 980 Realm

Stocks opened lower today following the latest release from the International Monetary Fund (IMF) which forecasts a contraction of 4.9% in global GDP in 2020, lower than the fall predicted a month ago. Markets also have to contend with an acceleration in coronavirus cases in parts of the U.S.


Global Macro

  • The IMF expects the world economy to shrink 4.9% this year, compared to a 3% contraction expected in April, before rebounding 5.4% in 2021, compared to 5.8% two months ago. The US GDP is seen falling 8% in 2020, while both the Eurozone and the UK should contract 10.2%. China will probably grow 1%, while India’s GDP is set to slump by 4.5%. The Fund also said it would take two years for output to return to pre-coronavirus levels.
  • Oil prices extended losses and plunged more than 5% on Wednesday, with WTI crude around $37.9 a barrel and Brent crude near $40.3 a barrel after EIA data showed US crude inventories rose by a much bigger-than-expected 1.442 million barrels in the latest week. Earlier in the session, oil prices were already falling due to further oversupply and demand concerns. On the demand side, new coronavirus infections continue to rise in the US, Latin America, Germany, India and China and Bloomberg reported that the Trump administration is considering new tariffs on $3.1 billion of exports from the UK, France, Spain and Germany.
  • The dollar index gained slightly to 96.8 on Wednesday, recovering from a 2-week low reached in the previous session, amid a general decline in investors’ risk appetite. Fears of a second wave of coronavirus mount as new infections are rising in the US, China, Latin America, India and Germany. Also, Bloomberg reported that the Trump administration is considering new tariffs on $3.1 billion of exports from the UK, France, Spain and Germany, raising further trade tensions. However, the US dollar is near levels not seen since early March, as investors still hope for a fast global economic recovery.
  • On Wednesday: European stocks ended sharply lower as rising coronavirus cases across the globe, and mounting worries about growth after the International Monetary Fund lowered its forecast for the global economy hurt sentiment and triggered heavy selling across the board. US stocks moved sharply lower over the course of the trading day, more than offsetting the upward move seen over the two previous sessions. The tech-heavy Nasdaq pulled back well off yesterday’s record closing high. Asian stocks ended broadly higher as improved data from key economies and hopes of more stimulus measures helped offset reports of a surge in the number of coronavirus cases in the U.S. and elsewhere across the world.
  • Wednesday’s data below:

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