Thungen Financial May 7th 2014 - OECD and Economic Update
Following on from the IMF the OECD, the Organisation for Economic Co-Operation & Development has just released its latest round of global forecasts regarding economic growth. Since its last report in November there have been several significant factors which have affected potential Global growth, and this has been acknowledged in the latest estimates.
Starting as a whole, the OECD see's worldwide growth at 3.4% for 2014, down slightly on their previous forecast of 3.6% six months ago. This downturn is seen mainly due to emerging economies not performing as well as expected. They still see a growth of 3.9% for 2015.
Breaking down the data to regions the OECD see's China's economy expanding, but by a reduced amount that seems to mirror that of the IMF. Previously at 8.2% for 2014 they now forecast a growth of 7.4%. In the US projections are down as well. 2014 was expected to see growth of 2.9% however due to the poor weather and the shutdown of the local government earlier this year, this has been reduced to 2.6%. In Europe only a small increase is predicted. Previously pegged at 1% they now expect a modest increase of 1.2% for the entire EU, this increase was mainly put down to the strength of the UK economy and its flexible monetary policy which see's its growth predicted to increase by 3.2% as opposed to the 2.4% quoted in November. They have also increased the outlook for 2015 to 2.7% from 2.5%. They also suggested that the ECB would be wise to consider a FED Reserve style bond buying program which has already been hinted at by Mario Draghi last month.
Now all the major indexes are back to trading in Asia there was a steep decline following on from the sell off seen in the US. Across the board markets dropped to a one month low as tension rise in the Ukraine and serious concerns about civil war in the East of Europe continue to play on investors minds. It is a big week for China as they provide a large array of economic indicators towards the end of the week and it is fair to say that the markets will be cautious in Asia as they await the results.
Asian Markets as of 7th May 2014:
Nikkei 114,086.07 -2.57% SSE Comp. 2,028.04 +0.03%
Hang Seng 21,716.71 -1.18% ASX 5,419.10 -0.80%
European Markets opened lower this morning after a poor showing in Asia and the selloff in the US. There are a mixed bag of earnings reports across the continent and although strong economic data and a positive outlook from the OECD should help reverse yesterdays drop the European indexes will be just as nervous as the Asian markets with regards to how Russia will look to deal with the growing violence in the Ukraine. The last few days have seen the most casualties in the east of the country and concerns are that as the local government looks to show its resolve by sending in the troops, Moscow will look to protect its interests in the region and retaliate with its own military. It appears threats of sanctions may have to take a back seat should the situation escalate further.
European Markets as of 7th May 2014
FTSE6,798.56 -0.35% Dax 9,467.53 -0.65%
CAC40 4,428.07 -0.75% BEL20 3,089.51 +0.01%
Zurich SMI 8,395.77 -0.16% MICEX 1,320.50 +1.94%
Once again there was positive data out of the US as they reported on the March deficit and import export data. The March deficit was down to $40.4bn, a 3.6% drop from the $41.9bn seen in February. This was mainly due to increases in both imports and exports after the they returned to normality after the severe weather seen earlier in the year. With exports up $3.9bn on February and imports up $2.5bn the contraction is seen to solidify the continued reports of an improving economy and will no doubt be mentioned in Ms. Yellen's speech later today. Despite the positive news earnings from ING pulled down financials and Twitter stock dropped over 17% helping drag down the technology sector. The main indexes in the US still managed to hold onto gains for the month and if they can stave off the profit taking today should be back into the green by close of business.
US Markets as of 7th May 2014
S&P500 1,867.72 -0.90% Dow Jones 16,401.02 -0.78%
NASDAQ 4,080.76 -1.38%
Comments from the OECD and the IMF maintain the fact of a global recovery in process. What we need to see is a resolve to the crisis in the Ukraine which undoubtedly is destabilising the region and markets as a whole. If the situation can be resolved without further conflict and violence there is a good chance we could see a silver lining to this dark cloud.
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