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Europe close: Stocks dip as IMF trims GDP forecasts for Germany and Spain

By Alexander Bueso

Date: Monday 20 Jan 2020

Europe close: Stocks dip as IMF trims GDP forecasts for Germany and Spain

(Sharecast News) - Stocks on the Continent were mostly lower at the start of the week, as the International Monetary Fund trimmed its forecasts for global and euro area growth over the next two years.
In its twice yearly World Economic Outlook, the economic watchdog trimmed its forecasts for global growth in 2020 and 2021 by one and two tenths of a percentage point to 3.3% and 3.4%, respectively, on the back of lowered forecasts for India and of social turmoil in multiple emerging markets.

"The risk of protracted subpar global growth remains tangible despite tentative signs of stabilizing momentum," the IMF said.

"[...] However, few signs of turning points are yet visible in global macroeconomic data."

Also weighing on investor sentiment, there were reports of 200 confirmed cases of a new SARS-like pneumonia in China, including three deaths.

By the end of trading, the Stoxx 600 had dipped 0.14% to 423.98, while the Cac-40 was off by 0.36% to 6,078.54 and the FTSE Mibtel was 0.57% lower at 24,002.45.

Germany's Dax on the other hand had reversed earlier losses and was up by 0.17% to 13,548.94.

In parallel, front month Brent crude oil futures were up by 0.43% to $65.13 per barrel on the ICE.

At the weekend, the Libyan National Army, led by General Khalifa Haftar, blocked crude oil exports from the country's eastern half, which was expected to result in a near complete halt to production.

Looking out to later in the week, investors were waiting on a potentially key speech from the US President at Davos, followed by an interest rate decision from the European Central Bank, the latter on Thursday.

Dufry was at the bottom of the pile on the Stoxx 600 as investors moved to price-in the fallout for the duty-free shop operator from the outbreak of a new SARS like virus.

Luxury goods maker Richemont was also on the backfoot, giving back the previous session's gains, when it reported a 4.0% increase in third quarter sales.

Going the other way, Polish video game maker CD Project gained as analysts at Credit Suisse that the five-month delay to the release of its Cyberpunk 2077 game would not have any long-term impact and might even enhance the game's value.

The Swiss broker therefore stood by its neutral recommendation and ZL 270.0 target price for the shares.

Stock in Qiagen, the German developer of assay technologies for molecular diagnostics, extended the previous session's gains on the back of renewed rumours of a potential offer for the company.

ConvaTec shares fell after a downgrade to 'underweight' out of JP Morgan.

In economic news, the Bundesbank forecast on Monday that the euro area's largest economy, Germany, grew by just 0.6% in 2019, marking its slowest pace since 2013.

For its part, the Federal Office of Statistics reported that German factory gate prices fell at a year-on-year pace of 0.2% in December (consensus: 0.0%).

And in its latest WEO, the Fund trimmed its 2020 GDP forecast for Germany from 1.4% to 1.3%, although that was better than 0.2 point reduction in its projection for Spain to 1.6%.

In 2017, Spain's GDP had expanded at a 3.0% clip.

The IMF also reduced its forecast for the entire euro area for the same year as a result, from 1.4% to 1.3%.


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