IMF Cut UK & US Forecasts: Global Growth Remains Unchanged

Monday, 24th July: For many in the UK, it is the first day of the school summer holidays. The time tends to bring low liquidity in markets, resulting  in sharp price movements, which wouldn’t normally occur. The first headline to grab investors’ attention before the European market open this morning was the latest global growth forecast from the International Monetary Fund, with their July update. Overall, the global growth forecast remains unchanged from the April outlook at 3.5% for 2017 and 3.6% in April. However, this has been based on accelerated growth in the euro area and Japan, offsetting weakened growth projection in the US and UK. A couple of snapshots to take note of from the release included the IMF seeing global risks as “broadly balanced” and that in the medium term, risks were “skewed to the downside”.

IMF Growth Projections, July 2017 release:

 

2017

2018

 

April

July

April

July

UK

2.0%

1.7%

1.5%

US

2.3%

2.1%

2.5%

2.1%

Euro-area

1.7%

1.9%

1.6%

1.7%

Japan

1.2%

1.3%

0.6%

0.6%

China

6.6%

6.7%

6.2%

6.4%

Global

3.5%

3.6%

Following the busiest day in UK skies on Friday, European airlines felt some turbulence following Ryanair’s Q1 results. Last week both easyJet and Wizz Air warned of strong competition heading in to the winter period, with Ryanair today stating they may drop fares by up to 9%. Revenues at the Dublin-based airline rose 13%, with pre-tax profits rising 55%. Average fare prices rose 1% in the 12 week period which included the strong Easter period (in 2016 Easter didn’t fall in the Q1 reporting period). Shares fell in early trade before paring back to close -1.38%. easyJet followed suit, closing -2.82%, while Dart Group, the owner of Jet2 fell >5.6%.

At the close European indices were mixed with the CAC in France closing +0.2%, although the DAX in Germany was forced lower by 0.35% as shares in the top 3 German carmakers fell. It follows reports that EU antitrust officials had started investigating allegations of a cartel among VW, BMW and Daimier. If the allegations are found true, the car makers could be hit with multi-billion euro penalties. BMW have categorically denied collusion, whereas VW and Daimler have made no comment. In the UK, the FTSE 100 fell 1.01% and the FTSE closed -0.68%

 

 

 

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