IMF upgrades regional and global outlook

The IMF released its October World Economic Outlook this week with an overall upgrade to global GDP growth to 3.2%, up 0.2ppt from its previous forecast. The fund noted that the impact of tariffs had been “tempered” but that risks remain “tilted to the downside.” Most developed economies received an upgrade to their growth outlook with the US now estimated to grow at 2%, up 0.1ppt from previous forecasts. For emerging markets, growth is estimated at 4.2%, up 0.1ppt from previously, with China’s outlook at 4.8% unchanged and India receiving an upgrade.

The Middle East and Central Asia regional outlook was also upgraded to growth of 3.5% with Saudi Arabia receiving a sizeable improvement in its outlook. The Fund specifically noted improvement in the GCC countries thanks to higher oil production as well as Egypt where they described the first half of the year as “better than expected.” The UAE is projected to grow by 4.8% in 2025 and 5% next year, Saudi Arabia at 4% for both years and Egypt at 4.3% in 2025 and 4.5% in 2026.

Fed Chair Jerome Powell gave a strong indication that the Fed would cut rates again this month, noting weakness in the labour market. The Fed has been relying on its own estimates and private sector measures of labour market conditions while the US government is shut down and data releases are interrupted. Powell also suggested that the Fed could bring an end to its quantitative tightening programme though the Fed’s overall balance sheet is still likely to end up remaining high by historic standards.

Producer prices in China extended their decline in September but at a 2.3% drop the decline was more moderate than a month earlier. Consumer prices were 0.3% lower y/y.

In the UK unemployment rose to 4.8% in the three months ending August, ahead of market expectations, while wages rose by 4.4%, the slowest pace since 2021. On a monthly basis for September, total payrolls dropped by 10k.

Today’s Economic Data and Events

IN trade balance Sept

12:00 TU central government balance Sept

Fixed Income

US Treasury markets were relatively muted despite Fed chair Powell’s seeming endorsement for more rate cuts ahead. Pricing may have reflect more the Fed coming to what markets were already expecting, rather than a surprise dovishness. Yields on the 2yr UST were lower by about 2bps at 3.4807% while the 10yr was more or less unchanged at 4.0321%.

FX

The dollar was weaker overnight against some major peers though overall performance was mixed. EURUSD added 0.3% to settle at 1.1607 while USDJPY fell by 0.3% to 151.85. However, GBPUSD dropped by 0.1% to 1.332 and commodity currencies were broadly weaker against the US dollar.

In emerging markets there was little change in the value of Turkish lira or Egyptian pound. The Indian rupee was moderately weaker at 88.7988 while South African rand depreciated by almost 0.4%, unwinding some of the prior day’s gains.

Equities

It was a mixed session for global equities with a 0.4% gain in the Dow Jones offset by a 0.8% drop in the NASDAQ and weak performance from the S&P 500. European markets were also mixed with the FTSE a touch higher while the Euro Stoxx index fell by 0.3%.

In regional markets the DFM added 1.4% while the ADX 15 was higher by about 0.1%. The Tadawul closed near unchanged.

Commodities

Oil markets closed lower overnight as the IEA downgraded their outlook for oil market balances again. The agency is now projecting slower oil demand growth in 2025-26 than their already bearish estimates while the implied inventory build for 2026 is projected at 4m b/d.

Brent futures fell 1.5% to USD 62.39/b while WTI was off by 1.3% to USD 58.70/b. Time spreads have moved lower but are still holding in backwardation at the front of the curve.