IMF Sees ‘Somewhat Less Severe Though Still Deep Recession in 2020’

European stocks are drifting lower in a volatile session on Wednesday after erasing earlier gains. Coronavirus news remains at the forefront despite the start of earnings season. U.S. equity markets are also giving back earlier gains after the major averages registered their first day of losses in five trading sessions on Tuesday.

In Europe, the UK’s FTSE 100 is trading 5960.04, down 9.67 or -0.16%. Germany’s DAX is at 12994.02, down 24.97 or -0.19% and France’s CAC 40 Index is trading 4934.33, down 13.28 or -0.27%.

The pandemic remains the key concern for investors with discouraging news that a pair of coronavirus drug trials have been paused in the U.S. over safety concerns.

Futures contracts tied to the Dow Jones Industrial Average added 1 point. They were higher earlier in the overnight session. S&P 500 futures and NASDAQ 100 futures gained 0.1% each.

COVID-19 Treatment Trials Put on Hold

Eli Lilly’s antibody treatment trial has been put on hold, the company confirmed to CNBC, and Johnson & Johnson announced Monday it has paused late-stage trials of its coronavirus vaccine candidate. While brief suspensions are routine in the world of drug trials, the latest cast added uncertainty on drug development timelines.

IMF Revises its global GDP Forecast Higher, but Warns the Economy ‘Remains Prone to Setbacks’

The International Monetary Fund on Tuesday turned slightly more positive on the global economy for this year, but warned of a “long, uneven and uncertain” recovery.

The global economy is now projected to contract by 4.4% in 2020 – an upward revision from an estimate of -4.9% made in June (which has now also been revised to -5.2% due to a new methodology used by the IMF). The IMF’s forecast assumes that social distancing due to the coronavirus pandemic will continue into 2021, and that local transmission will fall everywhere by the end of 2022.

“We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” the IMF’s chief economist, Gita Gopinath, said in the latest World Economic Outlook.

She added that the revision was driven by better-than-expected growth in advanced economies and China during the second quarter of the year and signs of a more rapid recovery in the third quarter.

However, the outlook warned that the coronavirus crisis is far from over.

The IMF projected “only limited progress” going forward and cut its gross domestic product growth expectations for next year to 5.2%, from an estimate of 5.4% made in June.

For a look at all of today’s economic events, check out our economic calendar.