IMF upgrades global growth outlook

The IMF upgraded its global growth outlook for 2024 to 3.2%, up 0.1 ppts from its prior estimate released in January. Growth is still set to be concentrated in emerging economies with the 2024 outlook for growth also revised slightly higher to 4.2% which India recording the fastest growth among major emerging economies (revised higher by 0.3ppt). Developed markets are set to grow by 1.7% in 2024, up 0.2ppts from the IMF’s prior forecast. For the Middle East and North Africa, the IMF lowered its growth projections to 2.8%, down 0.1ppt from its January WEO.

Labour market data for the UK gave some mixed signals in the latest release. The unemployment rate increased to 4.2% for the three months to February, up from 3.9% in the prior three-month period and its highest level since August last year. Wage growth, however, moderated to only 6% y/y from 6.1% previously. High wage levels have been a challenge for the Bank of England to navigate its way to easing policy and markets are now pricing in a first cut from the BoE in August this year and even then not fully.

The ZEW survey of investor sentiment in Germany improved in April to 42.9 from 31.7, a substantial bump and its best performance since the start of 2022. Investors remained downbeat on current conditions which came in at -79.2 for April but the improvement in the forward-looking element suggests investors believe that activity in Germany’s economy has started to turn a corner.

US industrial production increased in March by 0.4% m/m thanks largely to higher manufacturing output which was up 0.5% m/m. Mining and energy production, however, was lower. Manufacturing has been improving in the last several months after substantial labour disruptions in Q4 last year impacted automobile production.

Today’s Economic Data and Events

• 10:00 UK CPI y/y Mar: forecast 3.1%
• 11:00 TU current account balance Feb: forecast USD -3.7bn
• 13:00 EC CPI y/y Mar (f): forecast 2.4%
• 22:00 US Beige Book

Fixed Income

• US Treasury yields pulled higher overnight with the 2yr UST yield up 7bps at 4.9871% and the 10yr up the same amount to settle at 4.6674%. Fed chair Jerome Powell said overnight that “recent data have clearly not given us confidence” and that the strength in the labour market and inflation means “it is appropriate to allow restrictive policy further time to work.” Markets have now pushed pricing for a cut back to September.
• Emerging market and high-yield bonds managed to be the relative outperformers yesterday with gains in USD indexes for both classes. GCC credit was generally softer, however.

FX

• Currency markets had a relatively muted close with the dollar still gaining against peers for a sixth day running on the DXY index. EURUSD settled lower by less than 0.1% at 1.0619 while GBPUSD fell further, down 0.16% to 1.2462. USDJPY continued to push higher with the yen now at its weakest levels since the early 1990s. Overnight it closed at 154.72.
• Commodity currencies also closed weaker. USDCAD moved higher by 0.3% at the expense of the Loonie to 1.3829 while AUDUSD fell 0.6% to 0.6402 and NZDUSD dropped 0.4% to 0.5881.

Equities

• Benchmark equity markets were lower overnight with the S&P 500 down 0.2% and the NASDAQ dipping by 0.1%. European markets caught up with some heavier selling from earlier in the week with a drop of 1.8% in the FTSE and a loss of 1.4% on the EuroStoxx.
• Asian markets have had a mixed opening today with Chinese equities higher while the Nikkei and Hang Seng are both softer.
• Regionally the DFM was lower by 1.4% while the ADX fell 1%. In Saudi Arabia the Tadawul index dropped 1.6%.

Commodities

• Oil prices closed near unchanged overnight with Brent futures at USD 90.02/b and WTI at USD 85.36/b. The API reported a stock build of 4m bbl last week while both gasoline and distillate stockpiles were lower.