IMF At It Again

IMF At It Again

IMF At It Again

April 13, 2016

Good Morning

The IMF yet again reduced their global growth forecast yesterday, saying the world had been growing “too slow for too long”. The theme of the IMF cutting forecasts is nothing new and we're  taking an educated guess that this is about the fifth time they've done this over the last five forecasts, which begs the question, why start so high in the first place – we'd certainly prefer to be surprised to the upside than the down.

The IMF also made their thoughts known on the Brexit, which they see as causing “sever global damage” because of the way it could sever trade agreements. At the moment we're still in a dead heat in the polls, but the Telegraph is reporting that Tory donors are planning an extra £5m in donations to counter the pro-EU leaflet that Cameron spent £9.3m on.

Lastly from the IMF, Reuters report on a draft memorandum that they've seen that says “despite generous concessional official financing and further reform plans…debt dynamics are projected to remain highly unsustainable… to restore debt sustainability, in addition to our reform efforts, a decisive action by our European partners to grant further debt relief will be essential”. That's all well and good, but the European establishment has made it crystal clear that debt relief that involves anything more than extending maturities and deferring interest repayments (which have already been granted) is never going to happen.

Oil hit its highest price for the year so far. Investors are banking on an output freeze when producers meet next week. Yesterday's rally has been unwound a little today on reports that Iran won't be in attendance though. We also think the market needs to consider what happens if oil output is frozen and prices rise to the point that projects that have been mothballed, particularly US shale, that are once again economically viable – we're sure people are itching to switch the machinery back on, which would only lead to oversupply again.

Stock markets have come out of the blocks strongly this morning, following on strong performances overnight in Asia and before that in the US session. Brazil's stock market put in an excellent performance yesterday, as news that Presidential impeachment is on the cards led investors to think the worst might be over.

Today's the start of earnings season on Wall Street, but banks are urging caution, not only with their own performance but with the wider index in general. Economic data to watch for today includes European industrial production, US retail sales and the all-important US oil inventories, which of late have had a strong cooling effect on rising oil prices.

Have a great day.

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