World Markets Slide after IMF Sounds Global Recession Risk Alarm

Barry Randall
09 Oct, 2012
New York City

Financial markets across the Atlantic turned cautious after the IMF lowered its global outlook and raised the prospect of a global recession. South African Rand drops to a 3-year low and Iran struggles to stabilize its devastated currency.

[R]4:15 PM New York – Financial markets across the Atlantic turned cautious after the IMF lowered its global outlook and raised the prospect of a global recession. South African Rand drops to a 3-year low and Iran struggles to stabilize its devastated currency.[/R]

U.S. indexes accelerated the decline after earnings worries resurfaced on the lowered global economic outlook from the International Monetary Fund.

The S&P 500 index and the Dow declined 0.8% and indexes in UK, Europe and Japan and Canada dropped more than 0.5%.

Washington based fund said that the prospect of recession in Europe are alarmingly high and economies around world could struggle three years after the financial markets meltdown if the U.S. fails to resolve its fiscal cliff. The second largest economy, China could also suffer a large decline in growth.

Markets noticed the alarming tone of the World Economic Outlook report released by the fund ahead of meeting of ministers of the developed nations in Tokyo.

In corporate news, Principal Financial agreed to acquire Chile-based pension company Cuprum for $1.5 billion. Spectrum Brands agreed to acquire Stanley Black & Decker unit for $1.4 billion.

The European indexes traded sideways and the IMF raised the prospect of recession in the euro zone to 80%. German Chancellor Angela Merkel faced widespread protests in Athens but urged the nation to stay in the currency union.

The ECB President Draghi estimated weak economic activity in the euro zone in a presentation to the European Parliament and suggested that there is no alternative to austerity measures in the Southern European region.

German manufacturing turnover remained unchanged and French deficit widened in August. Greek inflation eased in September.

In European corporate news, the perfume and scent maker Givaudan said third quarter sales climbed 14.4% to Sfr1.1 billion. Julius Baer plans to slash additional 1,000 jobs as it merges international wealth management of Merrill Lynch. Rio Tinto turned cautious on the outlook over the next few quarters.

The UK indexes fell after manufacturing output declined and trade deficit widened in August. SSE completed the acquisition of Endesa Ireland for €308 million.

Commodities, Bonds and Currencies

U.S. treasury yield on 10-year bond decreased to 1.71% and on 30-year bond declined to 2.93%.

The U.S. dollar inched lower to $1.287 to a euro and decreased against the Japanese yen to 78.22 yen.

Immediate delivery futures of Texas crude oil increased $2.90 to $92.23 a barrel and Brent crude added $2.60 to $114.42, futures of natural gas increased 0.07 cents to $3.47 per mbtu and gasoline traded up 6.75 cents to 296.05 cents a gallon.

In metals trading, copper increased 0.20 cents to $3.72 per pound, gold decreased $9.80 to $1,765.90 per ounce and silver decreased 9 cents to $33.92.