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While you were sleeping: IMF sees slowing growth

Wednesday 21st January 2015

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Wall Street fell amid disappointing results from Johnson & Johnson and Morgan Stanley, and after the International Monetary Fund downgraded its forecast for global economic growth for this year and next. 

The IMF said in its latest quarterly global outlook that it now expects the world economy to expand 3.5 percent in 2015, down from its 3.8 percent estimate in October. It lowered its estimate for growth in 2016 to 3.7 percent, from 4 percent in October.

On a positive note, the IMF lifted its estimate for US growth this year to 3.6 percent, from 3.1 percent previously.

“Although the theme is that the US is the best market out there, from a global perspective, you can’t see a slowdown in every country and expect the US to stay above water,” Joe Bell, a Cincinnati-based senior equity analyst at Schaeffer’s Investment Research, told Bloomberg News.

Some pointed to a silver lining. 

"This absolutely raises the odds that we'll see more central bank action," Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago, told Reuters. “The upside to seeing less international growth is that it is now very unlikely the Federal Reserve will raise interest rates mid-year.”

Oil prices fell, with benchmark Brent crude falling as low as US$47.78, while US crude traded as low as US$46.23.

In afternoon trading in New York, the Dow Jones Industrial Average dropped 0.74 percent, the Standard & Poor’s 500 Index shed 0.38 percent, while the Nasdaq Composite Index fell 0.21 percent. US financial markets were closed for a public holiday on Monday.

Shares of Johnson & Johnson and those of Intel retreated, down 3.4 percent and 1.9 percent respectively, leading the Dow lower. 

Shares of Johnson & Johnson fell after the company predicted a drop in earnings in 2015.

“It’s not uncommon for J&J to be a little more conservative as they start the year,” Tony Butler, an analyst at Guggenheim Securities, told Bloomberg News of the 2015 forecast. He said it’s not clear whether there is some “underlying weakness” that the company is worried about.

Shares of Morgan Stanley fell, last down 1.6 percent, after the bank posted fixed-income trading revenue that fell short of expectations. 

In Europe, the Stoxx 600 Index finished the session with a 0.8 percent gain from the previous close, ahead of Thursday’s gathering of European Central Bank policy makers, who are widely expected to announce a sovereign debt purchase program to stoke the tepid euro-zone economy.

The UK’s FTSE 100 Index advanced 0.5 percent, while France’s CAC 40 Index rallied 1.2 percent.

Germany’s DAX Index rose 0.1 percent to a record. A report from the ZEW Center for European Economic Research showed investor confidence climbed more than expected to the highest level in 11 months in January. ZEW's monthly survey of economic sentiment climbed to 48.4 in January, up from 34.9 in December.

 

 

BusinessDesk.co.nz



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