The main message of the IMF meeting in Washington this weekend was vulnerability in global growth. Christine Lagarde, IMF Managing Director, described it as ‘not so vibrant’, other language used throughout the summit was ‘pessimism’, ‘gloomy’, ‘downbeat’.
Main points covered:
· Warning that global growth is at its lowest ebb.
· U.S feels robust in its economy since 2008 evidenced by unemployment figures falling month on month.
· Little growth in Europe as Eurozone countries have relied on quantitative easing rather than evolving structural reform.
· Sentiment affected in Germany with some fallout from the Russian sanctions holding exports down.
· Germany singled out to invest more in infrastructure and education.
· Oil prices down through Saudi reducing their export prices.
· UK on the road to recovery – European countries need to mirror the UK fiscal policy.
· Growth remains firm in emerging economies and buoyant in low-income developing countries.
· Identified risks are: Challenges associated with monetary normalization in some advanced economies: increased risk-taking amidst low volatility in financial markets, and heightened geopolitical tensions.
The IMF communiqué reads, “A revival in economic activity is underway in some advanced economies, notably in the United States and United Kingdom. The recovery is modest in Japan, and tentative in the euro area.”
Overnight markets seemed to reflect the IMF mood:
Hang Seng down -147.72 (-0.64%) at 22,941
ASX 200 down -40.45 (-0.78%) at 5,148
S&P 500 down -22.08 (-1.15%) at 1,906
DJIA down -115.15 (-0.69%) at 16,544
Nasdaq down -102.10 (-2.33%) at 4,276
Eurofirst 300 down -20.82 (-1.58%) at 1,293
FTSE100 down -91.88 (-1.43%) at 6,340
CAC 40 down -67.74 (-1.64%) at 4,074
Dax down -216.21 (-2.40%) at 8,789