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Risk off in global stocks and bonds, Lagarde warns about the 'new mediocre' and it's PMI day. Here are some of things people in markets are talking about today.
Equity markets across the globe are selling off this morning. The MSCI Asia Pacific Index slid 1.6 percent with Japanese shares leading the losses as the yen rallied near its highest level against the dollar in 18 months. In Europe, the Stoxx 600 was trading 1.6 percent lower at 10:19 a.m. London in a broad-based selloff. S&P 500 futures are 0.8 percent lower. As stocks are falling, bonds are rallying, with the yield on German 10-year bonds falling below 0.1 percent for the first time in almost a year while U.S. Treasuries are also advancing. Gold is higher.
IMF Managing Director Christine Lagarde warned of the growing risks facing the global economy in a speech delivered in Frankfurt this morning, saying the outlook for growth has dimmed in recent months. In an interview afterwards with Bloomberg TV she said she christened it the "new mediocre."
Growth in the euro area remains "sluggish" according to Markit Economics, which published its Purchasing Managers Index for the shared-currency zone this morning. The composite index rose to 53.1 in March, above the 50 level that indicates growth, but below the initial reading of 53.7 published on March 22. In the U.K., the composite number rose to 53.4, with Markit warning that both global uncertainty and the upcoming referendum on EU membership were weighing on sentiment. Markit composite PMI for the U.S. is due to be published at 9:45 a.m. EDT, with ISM non-manufacturing at 10:00 a.m.
India cuts rates, Australia holds
India’s central bank lowered its key interest rate 25 basis points to 6.5 percent, a move predicted by the vast majority of economists surveyed by Bloomberg. Governor Raghuram Rajan said the policy stance would remain accommodative, but investors are concerned that his room for maneuver will be limited by the weather. A third straight year of below-average rainfall would put pressure on food prices, limiting the central bank's scope for easing. In Australia, Reserve Bank Governor Glenn Stevens held rates unchanged and fell short of calling for a weaker currency as some analysts had expected. The Australian dollar weakened over 1 percent against the greenback after strengthening immediately after the release.
Hard times for investment banks
Pressure remains on global investment banks even as they continue to shed workers. Analysts have cut profit estimates for Goldman Sachs Group Inc. by 94 cents per share in the last four weeks. The timing of the Panama Papers, and the extra reputational damage they may cause to major institutions could not be worse. Credit Suisse Group AG Chief Executive Officer Tidjane Thiam is seeking to put his bank's recent problems behind him by looking for expansion opportunities in Asia.
What we've been reading
This is what's caught our eye over the weekend.
- Odd Lots Podcast: The unbearable brightness of being a shadow bank.
- Baltic Dry surges 62 percent in two months, and that's bad news for shipping.
- The European Central Bank sells some bonds...
- ...While investors trying to get ahead of the ECB turn to derivatives.
- Pimco says Gross was told he'd lose $200 million bonus.
- It was a stock picker's market in the first quarter. Too bad about the stocks picked.
- Saudis want to double their equity market in a post-oil economy.