More Pessimism From IMF

The latest update from the International Monetary Fund yesterday makes for fairly bleak reading. The group was seen cautioning over the downside risks to global growth this year as a result of a combination of factors. Global GDP is now forecast to rise just 2.8% this year, following the latest downward revision, and 3% next year. The group cited still-high inflation, recent central bank tightening, the continuing fallout from the conflict in Ukraine as well as turmoil within the global banking sector as being the key reasons behind the expected drop in global growth.

UK Economy to Suffer Worst in G7

Notably, the IMF warned that out of the G7 economies, the UK would likely be the worst performing and alongside Germany is the only economy forecasted to experience negative yearly growth of -0.3%. The IMF cited the fallout from Brexit as the main issues facing the UK, noting that these financial issues had been amplified through the mistakes made by former UK PM Liz Truss.

Aussie Housing Market Warning

The IMF was also seen focusing on Australia in its outlook yesterday. The group warned that the domestic property market is experiencing a high level of risk, the second highest in the developed world, as a results of higher interest rates and excessive household debt. The IMF warned over mortgage default risks which pose a significant risk to the economy as a whole.

US Growth Outlook Revised Higher

However, there were some bright spots in the report. The IMF revised its US growth outlook slightly higher to 1.6% from 1.4% prior, citing strength in the labour market there. Overall, though, the report struck a firmly pessimistic tone and warned that should excessive inflation continue, necessitating further central bank tightening, the global economy is headed for a hard landing. In this scenario, the IMF signalled that global interest rates would likely end up falling back to pre-covid levels as central banks would need to undo recent tightening in order to support the economy.

Downside Risks

Looking ahead, the group cited the main downside risks in its outlook as: fresh inflation rise and further central bank tightening, an escalation of the war between Russia and Ukraine, a wider banking sector crisis and setbacks in the

Technical Views

MSCI World Stocks Index

The market has broken below the rising trend line from last year’s lows following the latest rejection at the 563.77 level. Currently, price is sitting on support at the 525.21 level which, if broken, opens the way for a deeper drop towards 452.09 next. To the topside, a break of the 563.77 level opens the way for a test of the 595.86 level next.