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LGT Navigator: IMF forecasts global growth dip

October 9, 2019

In view of the ongoing trade conflicts, the International Monetary Fund (IMF) expects lower economic growth worldwide this year. The world is in a phase of "simultaneous weakening", said new IMF chief Kristalina Georgieva on Tuesday in Washington. This year, the IMF expects "slower growth in nearly 90% of the world".

Growth is expected to be the weakest since the beginning of the decade, Georgieva said according to the minutes of the speech. The IMF will therefore adjust its official forecasts for 2019 and 2020 downwards next week. According to an IMF forecast, the trade conflict between the US and China could cause global economic output to fall by up to USD 700bn (or about 0.8% of global GDP) next year, roughly the size of the entire Swiss economy. And should the global economy weaken even more than previously expected, a coordinated response from fiscal policy could become necessary, Georgieva said. "Our research shows that spending increases are more effective and have a multiplier effect when countries act together."

US producer prices rise significantly weaker than expected

In the US, producer prices rose unexpectedly weakly in September, which could be a setback for the Federal Reserve's hopes of achieving its inflation target in the coming quarters. Compared to the same month last year, they rose by 1.4%, as the US Department of Labor announced in Washington on Tuesday. This is the lowest rate since November 2016. Analysts had expected an average increase of 1.8%. In the previous month, the rate had also been 1.8%. Meanwhile, the US Federal Reserve has again pumped fresh money into the financial system. A total of USD 76.35bn was made available to the banks via repo transactions to counteract bottlenecks in the money market.

US government increases pressure on China

Just before the trade talks in Washington, which begin tomorrow, the US government seems to want to increase the pressure on China by putting eight Chinese technology giants on a "black list" yesterday. According to this list, the companies concerned can only do business with American companies with the approval of the US authorities. The US government is thus sanctioning alleged human rights violations by Chinese companies against Muslim minorities in western China. The Chinese leadership sharply criticized the US decision. "We urge the US to correct the mistakes immediately and reverse the decisions," said a Chinese State Department spokesman on Tuesday. He announced determined resistance from the Chinese side.

Turkish stock market moderately burdened by Trump threat – Lira supports

Following yesterday's verbal attack by US President Donald on Twitter towards Turkey, the stock exchange in Istanbul was initially only moderately impressed. The BIST 30 index lost -0.8% to 126,251 points in early trading on Tuesday. The only modest decline is probably also due to the Lira, which had already depreciated massively by more than -2.5% the previous day. A cheaper lira should support the country's export industry.

Johnson and Merkel regard Brexit agreement as "extremely unlikely"

In the dispute over a Brexit in three weeks, the British government has sharpened the tone and blamed the EU for a possible failure of the talks. A Brexit agreement with the EU is very unlikely, both Prime Minister Boris Johnson and Chancellor Angela Merkel, who spoke out in favour of Northern Ireland remaining permanently in the European Customs Union and the Internal Market, said after a phone call yesterday. EU Council President Donald Tusk criticized Johnson's negotiating tactics. Tusk told Johnson that it was not a question of winning a "stupid blame game". It is about the future of Europe and Great Britain, about the security and the interests of the people. The pound sterling promptly dropped by half a percent. There was no more dramatic market reaction as Berlin did not confirm Merkel's statements. Finally, Johnson could still be forced by the Benn Act to apply for an extension if no agreement was reached on 19 October. Should this actually happen – albeit under mutual blame – the pound should be able to breathe a sigh of relief.

Economic Indicators October 9

MEZ Country Indicator Last
08:30 FR BdF Business Sentiment 98.66

Earnings Calendar October 15

Country Corporate Period
US Citigroup Q3
US Goldman Sachs Q3
US Johnson & Johnson Q3
US JPMorgan Chase Q3

 

 

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Editor: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
Source: LGT Bank (Switzerland) Ltd.

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Herausgeber: LGT Bank (Schweiz) AG, Glärnischstrasse 36, CH-8027 Zürich
Redaktion: Alessandro Fezzi, +41 44 250 78 59, E-Mail: lgt.navigator@lgt.com
Quelle: LGT Bank (Schweiz) AG
Core Personal Consumption Expenditure
MEZCountryIndicatorLast08:00DERetail Sales (y/y)-1.7%08:45FRConsumer Prices EU Harmonized (y/y)1.4%09:00ESGDP (y/y)2.4%09:55DEUnemployment Rate5.0%11:00EUGDP (y/y)1.2%11:00EUCore Consumer Prices (y/y)1.1%11:00EUUnemployment Rate7.5%11:00ITConsumer Prices EU Harmonized (y/y)0.8%12:00ITGDP (q/q)0.12%14:15USADP Employment Report102k20:00USFederal Funds Target Rate2.5%