IMF Slashes Growth
As was expected, the International Monetary Fund (IMF), gave a bleak outlook on the world economy, cutting its economic growth forecast from 3.5% to 3.3%. Ouch!
The overarching theme was one of uncertainty surrounding trade and the disruptive effects of protectionism and tariffs on supply chains, productivity growth and business investment. They’re not wrong there…
This announcement from the IMF, coupled with the US’ potential $11bn in tariffs on EU products, sent the VIX soaring +3.4% from close to its 52 week low as investors were given a stark reminder about the risks still present in the global economy.
The shift in sentiment produced mixed effects in Asian markets this morning with some opening higher, while others lost momentum. The Japanese Nikkei index dropped -0.53%, while Australia’s ASX and China’s CSI remained relatively muted, up +0.03% and +0.26% respectively.
Things were also mixed on the commodity front as oil saw early losses, falling back towards the $70.30 mark, while gold firmed slightly. This uncertainty is likely to filter through into US markets later in the day as investors weigh up the potential for an EU trade war and the start of a fresh earnings season on Friday, kicked off by Wells Fargo and JP Morgan.
Never a dull day in the markets!