Growth worries continue to put pressure on European markets
Fiona Cincotta October 9, 2012 4:14 PM
<p>European markets are seen adding to yesterday’s losses as early gains were given up quickly and markets across the continent turned negative. Investors continued to […]</p>
European markets are seen adding to yesterday’s losses as early gains were given up quickly and markets across the continent turned negative. Investors continued to worry over the slowdown in global growth and sentiment was further dented as the International Monetary Fund cut its global growth forecast.
The IMF slashed its projections for global growth for 2012 and 2013. The figures released today show that the fund now expects the global economy to grow by 3.3% for 2012 instead of the 3.5% estimated in July. For 2013 the expectation is 3.6%, revised down from 3.9%.
These downward revisions are because slow growth and uncertainty from more advanced economies is having a massive knock on effect on emerging markets and developing economies. This has been especially evident in China whose exports to Europe and the US have been severely affected. It was only yesterday that the growth forecast for this emerging market was reduced from 8.2% to 7.7%.
The IMF also highlighted the importance to gain control of the European debt crisis and also the impending “fiscal cliff” in the US which will affect its growth prospects.
Christine Lagarde, IMF President, specifically urged Greece to do more on all fronts for its bailout demands. As Spain has taken centre stage for the last few weeks – Greece has been pushed to the back of investors’ minds. These comments and the fact that a full agreement on conditionality must be reached before the loan disbursement to Greece, adds to the uncertainty of the eurozone debt crisis. However there appears to be a calmer sentiment surrounding the process this time round.
Europe remains a key focus throughout the day as the Eurozone Finance Ministers Summit in Luxembourg continues whilst ECB President Draghi is due to speak to the European Parliament Economy Committee. German Chancellor Angela Merkel will also visit Greece for the first time since 2007, trying to present a united front for the markets.
Elsewhere the start of the US earning season this evening is resulting in some apprehension in the markets. The third quarter earnings season is expected to be a weak one and it would seem that the market has set the bar quite low. With this in mind there is hope that the bar is low enough for the markets to comfortably get over the figures which could end the 11-quarter trend of year-over-year gains in earnings.
Alcoa are the first to report tonight after the bell and are expect to break even; Chevron Corp and Yum! Inc will also report results. All three companies are sensitive to trends in the global business cycle so investors will be watching closely to help gauge their risk profile going forward.
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.