U.S., World Markets Cautious After IMF Trims Outlook

Bikram Pandey
16 Jul, 2012
New York City

U.S. indexes traded sideways as trading volume inched lower and the IMF lowered its global growth outlook. The global lender warned the U.S. to lift its debt limit sooner than later and urged European leaders to accelerate fiscal and banking integration.

[R]4:10 PM New York – U.S. indexes traded sideways as trading volume inched lower and the IMF lowered its global growth outlook. The global lender warned the U.S. to lift its debt limit sooner than later and urged European leaders to accelerate fiscal and banking integration.[/R]

U.S. indexes edged lower after retail sales fell unexpectedly in June and the International Monetary Fund lowered global growth outlook.

Stocks were under pressure after retail sales fell for the third month in June and summer doldrums left most indicators directionless in trading today.

Separately, the IMF left its outlook for the current year economic growth at 3.5% and trimmed 2013 forecast to 3.9% growth from 4.1%.

The global lender also trimmed the UK outlook for this year to 0.2% from the previous estimate in April of 0.8%, held its forecast of 0.3% contraction for the euro zone, trimmed growth in China to 8% from 8.2% and for India to 6.1% from 6.9%.

The IMF also shaved the U.S. outlook for the current year to 2% from 2.1% but warned that the looming disagreement among politicians may slowdown the economy further and to “mitigate the risks of financial market disruptions” policymakers must act well ahead of the deadline in October.

Washington is expected to run out of money unless the U.S. Congress agrees to lift the statutory debt limit of $16.4 billion in October.

On the merger front, Par Pharmaceutical inked a merger agreement to be acquired by TPG for $1.9 billion. Thermo Fisher agreed to acquire One Lambda for $925 million in cash. GlaxoSmithKline lifted its hostile offer to $3.6 billion for Human Genome.

In corporate news, Citigroup second quarter declined 12% to $2.9 billion and Gannett net plunged 21%. Visa and MasterCard agreed to settle a class action lawsuit that may cost at least $6 billion for price-fixing allegations.

The European indexes traded lower ahead of the German court ruling on Spanish bank bailout plan. Italy said it plans to cut public debt by 20% in five years through the sale of assets. Accor agreed to acquire hotel portfolio of Mexico-based Grupo Posadas.

In economic news, German factory employment rose and Italian exports improved in May. Annual inflation in the euro area was stable but Norwegian trade surplus and Austrian inflation rose in June. Swiss industrial production eased in the first quarter.

The UK indexes dipped after home prices fell in July and the IMF lowered its growth outlook to 0.2% in the current year.

Markets in Japan were closed to celebrate Marine Day.

Australian indexes closed higher for the second day in a row as investors bid up resources stocks. Whitehaven Coal surged 17% after it received a takeover bid. Seven West Media was halted after it planned to finish its $440 million offering at 20% discount.

Commodities, Bonds and Currencies

The yield on 10-year bond traded lower to 1.45% and on 30-year bond fell to 2.53%.

The U.S. dollar inched lower to $1.228 to a euro and decreased against the Japanese yen to 78.80 yen.

Immediate delivery futures of Texas crude oil increased 55 cents to $87.65 a barrel and Brent crude gained $1.38 to $102.80, futures of natural gas fell 0.07 cents to $2.80 per mbtu and gasoline price increased 2.22 cents to 283.81 cents a gallon.

In metals trading, copper decreased 1.40 cents to $3.49 per pound, gold traded flat at $1,592.10 per ounce and silver decreased 3 cents to $27.33.