Market Brief – More IMF Warnings

The International Monetary Fund has come out with another warning this afternoon. The mood of the market was already risk-off and this news only survived to worsen sentiment.

Going into details the IMF warns that property downturn in China has deepened with a heightened risk of spill overs to banking, corporate and local government sectors.

Additionally, they said the “Global stress tests shows up to 29% of emerging market banks would be undercapitalised in a severe economic downturn”.

More worrying still the IMF body “Warns of heightened risk of rapid, disorderly repricing in financial markets, amplified by existing vulnerabilities and poor liquidity”.

The IMF chief economist says, ‘worst is yet to come for many’ and 2023 ‘will feel like a recession’ and he sees 2022 growth at 3.2% vs 3.2% in July and 2023 growth at 2.7% vs 2.9% in July

In terms of countries the IMF saw China 2023 GDP 4.4% vs 4.6% in July and Eurozone 2022 GDP 3.1% vs 2.6% in July; 2023 0.5% vs 1.2% in July.

The IMF saw US GDP seen at 1.6% vs 2.3% in July; 2023 GDP at 1.0% vs 1.0% in July and Japan 2022 unchanged; 2023 1.6% vs 1.7% prior. They also projected India 2022 6.8% vs 7.4% prior. 2023 unchanged at 6.1%.

In July, the IMF also downgraded forecasts and earlier this month, Giorgieva said that much of the global economy was set for a recession.

The big differences in this report are much lower estimates for the eurozone with Germany and Italy now seen contracting in 2023.

In this forecast the IMF outlined a 1% global contraction in a downside scenario that includes a 30% oil price jump, Chinese property disruptions and severe tightening due to inflation.

Risk-off assets are suffering today also due to the situation in the Ukraine which is only like to worsen. The trend is definitely down for stocks.