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Macroeconomic & Geopolitical

Global Growth Waning

26 July 2019 - 4 min read

The three things you need to know this week: IMF lowers its growth forecasts and cites risks are skewed to the downside, China announces financial market liberalization and 37% of the S&P 500 has reported earnings.

Overview

Global Growth: The IMF lowered its global growth forecast in its July World Economic Outlook report. Growth for 2019 and 2020 was lowered by .1 to 3.2% and 3.5%, respectively, from April’s forecast. The report noted weaker-than-anticipated global activity so far this year and generally softening inflation. Investment and consumer durables demand remains subdued across advanced and developing economies and households are reluctant to commit to long-term spending. Global trade remains sluggish and the predicted pickup in 2020 growth is tenuous. The report highlighted that risks are skewed to downside.

China Financial Market Liberalization: China’s official state-run news agency reported it will lift the foreign ownership limits on securities, fund management and futures companies by 2020, one year ahead of schedule. This follows a move last year to ease the limit on foreign investment in joint-venture securities, fund management and futures companies to 51%. Ownership in asset management, pension management, and currency brokerage firms is also being opened up to foreign companies. Foreign ownership limits for insurance companies will be allowed to exceed 25%. In addition, foreign firms will be able to conduct credit ratings on bonds.

Earnings Update: Bloomberg data shows 37% of the S&P 500 reported earnings with revenues up 4.2% Y/Y and earnings 3.5% higher Y/Y. Relative to expectations, sales are 1.4% higher and earnings have surprised to the upside by 4.7%. Thirty-five percent of the companies that report in the current season for the Stoxx 600 have announced results, with sales up 2.8% Y/Y and earnings down 3.7% Y/Y. So far, sales are in line with estimates while earnings are 5.2% better than expectations.

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