Spreadex Market Update

IMF cuts global growth forecasts, markets snooze their way through MLK Day



Without the Dow Jones for guidance – the US tends to dictate the pace of trading when region-specific news is lacking – the European indices drifted their way through Monday’s session, not helped by the IMF cutting growth forecasts in Davos.

The Washington-based organisation said it is now expecting the global economy to expand by 3.3% in 2020, a slight revision from the 3.4% estimate released 3-months ago. 2021 saw a similar tweak, from 3.6% to 3.4%. Compounding the negative news, the Fund said growth was just 2.9% last year, a post-financial crisis low.

Though investors didn’t react strongly to this update, it also served to prevent any real turnaround. The FTSE drifted 0.2% lower, leaving it a smidge above 7650, while the CAC fell away from 6100 following a 0.4% drop. The DAX was the only major index to buck the day’s downward trend, adding 0.2% to near 13550. And that was about it.

The pound managed to pull off its intraday lows, but couldn’t completely erase the day’s losses. Against the dollar it sat the wrong side of $1.299 thanks to a 0.2% decline, while it was under €1.172 against the euro.

Tomorrow, hopefully, should be a bit more exciting. Not too long after the European open there’s the UK jobs report, where wage growth is expected to dip from 3.2% to 3.1% (including bonuses). There are then the ZEW economic sentiment readings from the Eurozone, with the German figure looking to jump from 10.7 to 15.2.

Perhaps most interestingly, the World Economic Forum properly continues in Davos, where special attention – as ever – will be paid to how Donald Trump conducts himself.

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