IMF warns of prolonged period of lower growth

Wednesday, April 08, 2015

The IMF has warned of a prolonged period of lower growth, reigniting fears that the world economy will face considerable headwinds over the coming years which would present significant obstacles to governments and policymakers. Included in their twice yearly World Economic Outlook the IMF warned that the threat of secular stagnation could severely impact living standards in developing countries which could grow at a slower pace than pre-2008 levels. Chinese growth levels were highlighted by the organization as a particular cause for concern stating that policymakers in Beijing had their work cut out to ensure that any shifting focus of the economy would need to be monitored closely to prevent a potentially sharp contraction in growth. 

Figures published yesterday by the ECB covering the first month of its QE programme indicated eurozone central bankers purchased government bonds to the tune of €52.5bn. Further details provided showed that among the biggest buys, €11.1bn of German government bonds while €8.75bn of French government bonds were purchased. Government bonds were purchased from all eurozone members expect Greece and Cyprus which were not included in the current QE programme until they complied with the terms of their EU bailout. The €52.5bn of government bonds purchased is already on top of the near €5bn in asset backed securities and €64.7bn in covered bonds that the ECB has on in balance sheet, both of which are included in the €1.1tn set aside.

Asian stock indices rallied higher overnight, building on the previous session’s gains with the Hang Seng leading the pack, surging over 2.5% higher overnight. Equities across the region were buoyed higher by the prospects of further supportive moves by the PBOC which could embark on further monetary easing. Japanese stocks extended gains for a fifth straight session with the Nikkei 225 and TOPIX adding between 0.6%-0.8% after the Bank of Japan announced it would maintain its record stimulus programme, with an 80tn yen annual rise in the monetary base. Japanese current account data released overnight also offered a boost to risk assets as a weaker yen saw the surplus exceed estimates of 1,196bn yen, coming in at 1,440bn yen in February as exporters continued to benefit throughout the first quarter of the year.

Hang Seng rallies substantially higher

HSI Index Hong Kong Hang Seng I 2015 04 08 07 50 44

Japan's trade surplus increases on weaker yen

JNBPAB Index Japan Balance Of P 2015 04 08 07 57 41

Events for today

0700

DE

Feb

Factory Orders

0830

DE

Mar

Markit Construction PMI

0900

UK

Mar

New Car Registrations

1000

EZ

Feb

Retail Sales

1530

US

w/e

EIA Energy Stocks

1900

US

Mar

FOMC Minutes

Topics: ECB, BoJ, Trade Balance, Yen, PBOC
More from: Kash Kamal