Binary Options Market Review 28/01/2013

IMF 2013 global economic growth forecasts

The International Monetary Fund (IMF) slightly lowered its forecast for global economic growth in 2013 to 3.5% (versus 3.6% forecast in October), and in 2014 to 4.1% (vs. 4.2% in October). The growth rate in 2012 stood at approximately 3.2%. In reference to the expected moderate growth in the next year, said the chief economist of the IMF: “It’s clear that financial markets are ahead of the real economy. The question is whether they are too much ahead or not… What we know is that it always takes some time for financial markets’ optimism to feed to the real economy and at this stage there are still obstacles to it”.

The IMF economists estimate that the Eurozone’s economy will contract in 2013 by 0.2%, compared to the previous forecast (October) of a 0.2% growth. The IMF warned that the Eurozone still poses a major risk to global economy. Nonetheless, they predict that the economic situation will improve and that in 2014 the Eurozone’s economy will grow by 1%.

The IMF economists slightly cut their forecast for the U.S. economic growth in 2013 to 2% (vs. 2.1% forecast in October), but, at the same time also raised their economic growth forecast for 2014 to 3% (vs. 2.9% forecast in October). The fund said: “U.S. politicians have to insure that the country gets through the debates regarding raising the debt ceiling without severe fiscal restraints. Politicians must agree on a credible medium-term fiscal consolidation plan, focused on entitlement and tax reform.

The IMF did not change their estimates regarding the Chinese economy – a growth of 8.2% this year and 8.5% in 2014. The fund’s chief economist said that “It’s not the rates that we saw before the crisis, but these rates are long gone”, but added that things are generally fine.

To summarize the global economic situation we note the phrase that the IMF managing director, Christine Lagarde, has coined: “We stopped the collapse, we should avoid the relapse, and it’s not time to relax”.

Positively, we should note that most of the economic data published this week in the U.S., Europe and China were encouraging. We mainly note the rise in the Purchasing Managers indices in January (PMI).

Regarding the European economy, we note the significant improvement recorded last week in most of the expectation surveys. However, expectation surveys continue to show the expectations for further contraction of the European economy in the coming months, even if at a relatively moderate pace (compared to the anticipated contraction in the fourth quarter).

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 Highlights regarding Global economy

The U.S. Congress voted last week in favor of a temporary increase of the U.S. “debt ceiling”, which will allow the government to continue to operate until May 19th. However, the debate about the future fiscal adjustments that has raged between republicans and democrats may increase uncertainty in the financial markets in the coming months (towards the decision to raise the debt ceiling permanently). In addition, if U.S. politicians do not reach an understanding regarding the automatic budget cuts (sequestration), then transverse cuts of $110 billion will take effect in early March.

More on the positive side, the ECB announced last Friday that the volume of loans repayments granted within the Long-term refinancing operations (LTRO) auctions was higher than expected, further evidence for the improvement in the liquidity of the financial system in Europe. European banks have decided to return to the ECB 137 billion euros, out of a total of 1.04 trillion euros that the ECB lent in two LTRO auctions, compared with estimates for a repayment of 84 billion euros.

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 Economic releases and events of the week

Monday: U.S. durable goods new orders

Tuesday: January U.S. conference board consumer confidence, expectations for a slight decrease

Wednesday: U.S. GDP for Q4 Quarterly rate (expectations for +1.2% vs. 3.1% in Q3), U.S. Fed rate decision, U.S. Personal Income and Spending (both for December), Eurozone Economic Sentiment Indicator and Consumer Confidence Indicator (both for January)

Thursday: December Germany retail sales for, expectations for an annual decrease of 1.3%

Friday: Eurozone employment data (expectations for a slight increase in the unemployment rate), U.S. employment data (expectations for stability in the unemployment rate and an addition of 160 thousand jobs in January), Purchasing managers’ indices (PMI) of the manufacturing sector in the U.S., China, and the Eurozone

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Binary Options Market Review 28/01/2013
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Author: David Wilson