IMF Downgrades Global Growth, Inflation Weak In U.S., Brexit Summit Begins

Weaker than expected inflation data and a downgrade from the IMF were not enough to move the market.
Thomas Hughes
IMF entrance with sign of International Monetary Fund, concrete architecture building wall security guard doors

The U.S. Market Is Unfazed By Weak Data

The U.S futures were indicating a slightly higher open in early pre-opening trading. The Dow Jones Industrial Average, S&P 500, and NASDAQ Composite were all up 0.10% to 0.15%. The move comes despite a downgrade to global growth from the IMG and weak inflation data at home.

The IMF says global growth will only be 3.3% this year, down another 0.20%, and the second major downgrade this year. According to them, downside risks prevail and the solution is in the hands of world governments. The IMF says a coordinated effort (ie resolving trade disputes) is needed.

On the economic front, U.S. CPI data was mixed. The headline 0.40% MoM and 1.9% YoY were both hotter than expected but core data was weak. Stripping out food and energy CPI rose a tepid 0.1% and 2.0%, both below consensus estimates. The dollar barely moved on the news.

The ECB Holds Rates Steady, An Emergency BREXIT Summit Is About To Begin

In Europe, the ECB held rates steady as expected. The bank did not issue any major changes in its policy statement and intends to continue on with TLTRO-III. The European Central Bank has had to backtrack on its plans to tighten policy later this year and may increase QE if the data doesn’t alter its trajectory. There was no data from the EU today.

In England the data was good. UK GDP grew faster than expected over the last 12 month period. The monthly data shows a 0.20% increase which is as expected but the YOY read is hot at 2.0%. Industrial and manufacturing production were both hot in the last month as well, helping to drive strength in the UK economy. The news is good for Brexit too because it shows confidence among the British people.

In Brexit news, Theresa May is headed to Brussels for an emergency summit with UK leaders. Among the dignitaries, she will meet German Chancellor Angela Merkel and EU Council President Tusk. May is expected to ask for an extension to the Brexit deadline, President Tusk is in favor of a flexible one-year deal.

Asian Markets Mixed, Data And Earnings Are In Focus

Asian markets were mixed in Monday trading following the IMF’s downgrade. The Japanese Nikkie fell -0.53% leading the declining indices despite positive moves in index giants Fast Retailing and Softbank. The Korean Kospi led advancing indices with a gain of 0.49%. It was supported by a tech-led really that had SK Hynix up 1.0%. The Shanghai Composite and Hang Seng were both hugging break-even levels while traders wait on new trade data.

In Australia, the ASX advanced only 0.03%. The index was weighed down by a near 10% drop in Crown Resorts after it yesterday’s 20% rise. The leaked news Wynn Resorts was interested in buying the company caused Wynn to pull out of talks. Now it looks like there is no Wynn for Crown Resorts.

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