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IMF cuts global growth forecasts as Chinese economy slows

The NAHB/Wells Fargo Housing Market index fell to 57 from 58 in December (itself revised up from 57). Analysts had been expecting a reading of 58. But the index has not been below 50 since June last year, and NAHB chairman Kevin Kelly said:

After seven months above the key 50 benchmark, builder sentiment is reflecting the gradual improvement that is occurring in many markets throughout the nation.

Following Monday’s market closure for Martin Luther King day, investors are taking some profits in early trading.

The Dow Jones Industrial Average is currently down 59 points or 0.33%, although it has recovered from larger falls earlier after the housebuilding figures.

Energy shares came under pressure as oil slipped again in the wake of the IMF’s cut in its global growth forecasts.

Update from the Bank of International settlements: lending to Russia by overseas banks fell by $11bn in the third quarter of 2014.

That was contrary to the broader trend, with cross-border lending overall up by $493bn, boosting the annual growth rate to 5% from 1% in the second quarter. The increase was concentrated in Japanese yen and US dollars, BIS said.

The TUC has a few frank words for the global thinkers gathering inDavos for the World Economic Forum this week.

The message is that the delegate list should be more representative of the issues being discussed, and not just an elite talking shop.

Frances O’Grady, general secretary, gets the point across:

Just one per cent of the global population owns half the world’s wealth, so we need some voices at Davos to speak up for the other 99 per cent. That’s why I’m here as part of a delegation of international trade union leaders.

If Davos is a closed shop for the wealthy and powerful elites who caused today’s global inequality, it won’t come up with the answers needed for a more fair and prosperous future for all the world’s workers and their families.

We need to get living wages and the protection of public services onto the agenda. And we need the business leaders attending to commit to cleaning up supply chains, paying their taxes and investing in decent jobs instead of the casino capitalism that caused the crash. The scale and nature of the European Central Bank’s hotly anticipated foray into quantitative easing on Thursday continues to occupy economists’ minds.

Franck Dixmier of Allianz Global Investors says action needs to be bold.

The stakes are extremely high in the run-up to the ECB’s QE announcement on Thursday and [ECB President] Mario Draghi would do well to adopt a bold, yet simple plan of attack to stave off a prolonged period of deflation and boost economic prospects in the Eurozone.

As the ECB finalizes plans for firing the last major weapon in its monetary policy arsenal, markets are hoping for a QE programme of at least EUR 500 billion and anything less will be perceived as a huge disappointment.

Eligible assets will certainly include government bonds, but the addition of corporate investment grade securities would be a welcome surprise for investors, which is not currently priced into the market. 

The worst mistake the ECB could make, in my view, would be to attach too many conditions and caveats to pacify the QE sceptics. Such an approach would make QE difficult to execute and obscure its full implications and consequences for investors.

For Mario Draghi, Thursday is the day the talking stops. It is two and a half years since the president of the European Central Bank said he would do “whatever it takes” to safeguard the future of the euro. Financial markets now want him to deliver on his pledge.

All the hurdles – economic, political and legal – have allegedly been cleared. The ECB will announce a programme of sovereign bond purchases, its equivalent of the quantitative easing programmes that were announced by the US Federal Reserve and the Bank of England six years ago.

Having ramped up expectations, there is now a danger that the long-awaited plan proves a damp squib. Markets want Draghi to put a figure on the size of his programme (preferably at least €1 trillion) and they want to know exactly how it will be operated. Given the length of time that has elapsed since Draghi’s “whatever it takes” speech, they will be unhappy with anything less.

Copper is trading higher after China’s growth figures were not as weak as many analysts had feared.

The world’s second largest economy grew by 7.4% in 2014, the weakest since 1990 and a touch below the government’s official 7.5% forecast but not as low as the 7.2% growth predicted in a Reuters poll.

Copper is considered a barometer for global economic demand and is closely linked to developments in China – its largest consumer.

Three-month copper on the London Metal Exchange was trading up 1% at $5,735 a tonne. Last week copper prices hit a five-and-a-half year low on the back of global growth fears. The UK will remain in the European Union, analysts and traders are convinced.  Of the 500 people surveyed for Bloomberg’s quarterly global poll, 71% believe the UK will be part of the EU for the foreseeable future.

A further 15% expect the UK to break away within five years, and another 8% said the UK would exit within a decade.

The Conservatives have promised a referendum on UK membership of the EU by the end of 2017 should they win the general election in May, increasing the chances of an exit.






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