Daily Stock Market Update: IMF Downgrades Weigh on Market Sentiment – Jan 20, 2016


The IMF decided to downgrade global growth forecasts for 2016 and 2017, citing concerns about the slowdown in the China and the slump in commodity prices. The institution lowered their GDP estimate from 3.6% to 3.4% this year and from 3.8% to 3.6% next year, projecting that emerging economies and commodity-driven nations might be adversely affected by China and oil.

Even so, US equity indices managed to squeeze in some gains for the day. The Dow 30 index was up 27.94 points to 16,016.02 (+0.17%), the S&P 500 index closed 1.00 point higher to 1,881.33 (+0.05%), but the Nasdaq ended 11.5 points down to 4,477.0 (-0.26%). The S&P 500 VIX, which is typically considered a gauge of market uncertainty, was down 0.97 points to 26.05 (-3.59%).

Carney douses rate hike expectations, FTSE climbs

In Europe, shares were also in the green, even as BOE Governor Mark Carney gave a downbeat outlook in his testimony. The UK central bank head confirmed that they’re not looking to tighten monetary policy anytime soon, given the downward pressures on growth and inflation.

With that, the London FTSE rose 96.88 points to 5,876.80 (+1.68%) as investors cheered the prospect of an even longer period of low borrowing costs. UK inflation readings came in better than expected, with the headline CPI rising from 0.1% to 0.2% and the core CPI up from 1.1% to 1.2%.

The German DAX edged up 142.36 points to 9,664.21 (+1.50%), the French CAC 40 was up 82.69 points to 4,272.36 (+1.97%), and the Euro Stoxx 50 rose 43.42 points to 2,978.81 (+1.48%). Data from the euro zone was mostly stronger than expected, with a larger current account surplus in the region and a smaller fall in the German ZEW economic sentiment index.

Asian shares in the red on risk-off mood

Risk aversion seems to have gained traction early in today’s Asian trading session, as traders got wind of New Zealand’s quarterly CPI reading. The economy reported that price levels fell by 0.5% in Q4, sharper than the projected 0.2% drop, while the Global Dairy Trade auction printed a 1.4% drop in prices. The Nikkei 225 is down 367.04 points to 16,681.33 (-2.15%) and the S&P ASX 200 index is down 37.17 points to 4,864.00 (-0.80%).

WTI crude oil slipped back below the $30/barrel level while Brent crude oil is also eyeing further losses on projections of a supply glut due to Iran’s return to the oil export market. Traders are still on the lookout for the American Petroleum Institute’s weekly oil report due today, along with the UK jobs figures and the Bank of Canada’s monetary policy statement.