While you were sleeping: IMF cuts global growth outlook

Wednesday 7th October 2015

Wall Street was mixed, as shares of DuPont rallied, while biotech stocks dropped, while the International Monetary Fund downgraded its global growth forecasts.

In New York trading at about 2.15pm, the Dow Jones industrial average added 0.25 percent. The Standard & Poor’s 500 Index fell 0.5 percent, and the Nasdaq Composite Index dropped 0.9 percent.

The Dow moved higher as gains in shares of DuPont and those of Chevron, last up 8.8 percent and 3.2 percent respectively, outweighed slides in shares of UnitedHealth and those of Merck, down 3.5 percent and 2.7 percent respectively.

DuPont Chair and CEO Ellen Kullman said she will retire from both positions on October 16. Edward Breen, member of the DuPont board of directors, will assume the role of Interim Chair and CEO, the company said.

Shares of Illumina sank 12 percent after the gene-sequencing company forecast fourth-quarter sales that fell short of analysts’ estimates.

Investors have reassessed the odds of a US Federal Reserve interest rate increase this year, betting policy makers will likely not move until 2016.

“Investors are tired of betting that the Fed will do anything this year,” Guillermo Hernandez Sampere, head of trading at MPPM EK in Eppstein, Germany, told Bloomberg. “A lot of people have to reduce their protection, which will feed into a rally. From a value point, we are still on an inexpensive level.”

A Commerce Department report showed the US trade deficit climbed by 15.6 percent to US$48.3 billion in August, the largest gap since March, as weakening global growth curbed exports.

"Trade will remain a drag on the real economy until well into next year," Steve Murphy, an economist at Capital Economics, told Reuters.

Indeed, the International Monetary Fund downgraded its forecast for the global economy from its previous estimate in July. It now predicts worldwide growth of 3.1 percent for 2015, and of 3.6 percent in 2016. It also lowered its expectations for US growth, now 2.0 percent this year, and 2.2 percent next year.

“Despite considerable differences in country-specific outlooks, the new forecasts mark down expected near-term growth marginally but nearly across the board,” Maurice Obstfeld, IMF economic counsellor and director of the research department, said in a statement. “Moreover, downside risks to the world economy appear more pronounced than they did just a few months ago.”

The IMF kept its 2015 forecast for the euro-zone economy at an expansion rate of 1.5 percent, though cut its 2016 estimate to 1.6 percent.

In Europe, the Stoxx 600 Index finished the session with a 0.6 percent increase from the previous close. The UK’s FTSE 100 Index rose 0.4 percent, Germany’s DAX Index climbed 0.9 percent, while France’s CAC 400 Index rallied 1 percent.

BusinessDesk.co.nz

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