Business World

Sunday 23 October 2016

Global growth will be disappointing in 2016 warns IMF's Lagarde

Published 30/12/2015 | 08:42

Christine Lagarde
Christine Lagarde

Global economic growth will be "disappointing" next year, the head of the International Monetary Fund said in a guest article for German newspaper Handelsblatt.

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"In many countries the financial sector still has weaknesses and in emerging markets the financial risks are increasing. All of that means global growth will be disappointing and uneven in 2016," IMF Managing Director Christine Lagarde said.

She added that low productivity, aging populations and the effects of the global financial crisis were putting the brakes on growth, which has weakened the medium-term prospects.

Earlier today Asian shares unwound early, as weakness in Chinese stocks continued and investors turned cautious following renewed selling in recently battered crude oil futures.

Financial spreadbetters predicted a lackluster start to European trading, with IG expecting Britain's FTSE 100 .FTSE to open down 0.2 percent. Germany's DAX .GDAXI and France's CAC .FCHI were expected to shed a few points and open flat in percentage terms.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS erased a positive start to edge down 0.1 percent, on track for a flat monthly performance and down 12 percent for the year.


On Wall Street, major U.S. indexes each gained more than 1 percent. All 10 major S&P sectors ended with gains, led by a 1.34 percent rise in the technology sector .SPLRCT, which lifted the S&P 500 .SPX to a modest increase for the year.

Japan's Nikkei .N225 ended the country's final trading day of the year up 0.3 percent, off session highs but still gaining 9.1 percent for 2015. But it shed 3.6 percent in December.

The broader Topix .TOPX rose 0.3 percent in thin trade, with only 1.32 billion shares changing hands, the lowest since April 2014.

"We're seeing thin volumes at year-end as the number of active participants has decreased due to the holidays," said Martin King, co-managing director at Tyton Capital Advisors.

Australian shares outperformed, rising 1 percent to mark their ninth consecutive day of gains.

But China's blue-chip CSI300 index .CSI300 was down 0.2 percent, while the Shanghai Composite Index .SSEC was flat, ahead of December manufacturing activity surveys which are expected to show the economy remains sluggish.

Qi Yifeng, an analyst at consultancy CEBM, said Chinese investors mostly worried about the economy, and a potential equity glut.

"Next year, there will definitely be a surge in share supply," Qi said, citing the expiration of the share-sale ban and reforms that would make new listings much easier.

Also damping investor sentiment, a Reuters poll showed that activity in China's manufacturing sector is expected to have contracted for a fifth straight month in December. The official data will be released on Friday, and a similar private survey on Monday.

Higher U.S. Treasury yields underpinned the dollar overnight, although yields were off highs in Asia.

The yield on benchmark 10-year U.S. Treasury notes US10YT=RR stood at 2.292 percent, compared with its U.S. close of 2.307 percent on Tuesday.

On the U.S. two-year note US2YT=RR, the yield closed at 1.095 percent on Tuesday after earlier touching its highest level since April 2010.

The dollar index .DXY, which tracks the greenback against a basket of six rival currencies, was up about 0.1 percent at 98.176.

After touching a nearly two-week low earlier in the session, the index rose to nearly a one-week high of 98.413 on Tuesday. It is up 8.8 percent for the year, though down nearly 2 percent for the month as investors pared their dollar-long positions after the U.S. Federal Reserve's widely anticipated interest rate increase in mid-December.

The dollar was steady at 120.40 yen JPY=, while the euro edged up 0.1 percent to $1.0930 EUR=.

The Australian dollar, meanwhile, slipped about 0.1 percent to $0.7286 AUD=D4 as the renewed selling in crude prices prompted investors to lock it gains on its rise to $0.7303 overnight, its highest since Dec. 10.

The New Zealand dollar was down 0.3 percent at $0.6848 NZD=D4, after it scaled a 10-week peak of $0.6881 in the previous session.

In commodities trading, U.S. crude futures CLc1 skidded 1.7 percent to $37.23 a barrel, while Brent LCOc1 shed 0.9 percent to $37.46. Both had jumped 3 percent overnight, taking back ground lost in the previous session as colder U.S. weather forecasts raised expectations of more demand.

But weekly data from industry group the American Petroleum Institute (API) showed a rise of almost 3 million barrels in U.S. crude inventories, defying expectations of no change and rekindling fears of a supply glut.

Spot gold XAU= edged up about 0.2 percent to $1,069.96 an ounce, but remained poised to drop 9.6 percent for 2015 to log its third year of losses.



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