[Good Morning Stock Market] European Markets Mixed... IMF Growth Forecast Downgrade, Impact of Trade Disputes

IMF Lowers Global Economic Growth Forecast for This Year
Waiting for Key Figures' Remarks at Davos Forum Amid Cautious Sentiment

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Minwoo Lee] While the U.S. stock market was closed in observance of Martin Luther King Jr. Day, European stock markets closed mixed. Although the International Monetary Fund (IMF) downgraded the global growth rate compared to October last year, it is analyzed that the easing of Brexit (the United Kingdom's withdrawal from the European Union) and the trade dispute between the U.S. and China at the Eurogroup meeting had an impact.

◆ Sangyoung Seo, Researcher at Kiwoom Securities = The IMF announced that the global economy is showing a slow recovery despite the first phase trade agreement between the U.S. and China. In particular, most growth rates announced in October last year were downgraded, with emerging markets centered on India (7.0% → 5.8%) experiencing a larger downward revision compared to developed countries. However, it is notable that China's growth rate was revised upward from the previous 5.8% to 6.0%.

Meanwhile, the IMF emphasized the positive aspect that manufacturing activity and global trade have bottomed out but mentioned that a turning point is still not visible, expressing ongoing concerns about the global economic slowdown. Amid this, market participants are adopting a wait-and-see stance, awaiting remarks from key figures such as U.S. President Donald Trump and European Central Bank (ECB) President Christine Lagarde at the Davos Forum held from the 21st to the 24th.

Looking at major stocks, Deutsche Bank (-2.16%) plunged due to earnings weakness, as major investment banks including Morgan Stanley and Credit Suisse (CS) lowered their target prices to around 6 euros, below the current stock price of 7.5 euros. Other financial stocks such as Banco Santander (-1.18%) and BBVA (-0.88%) also underperformed, adding to the burden. This is generally attributed to increased concerns over earnings weakness caused by a low short- and long-term interest rate spread. Additionally, some consumer-related stocks such as Burberry (-2.23%) and Louis Vuitton (-2.12%) declined amid heightened concerns over earnings weakness. However, defensive stocks like German power company RWE (+1.26%) and Spanish telecommunications company Telefonica (+2.72%) showed strength. Overall, the market was largely in a wait-and-see mode, limiting index fluctuations, but individual stocks showed a tendency to be more sensitive to negative factors.

◆ Sungwoo Park, Researcher at DB Financial Investment = The IMF forecasted that the global economy will recover this year compared to last year's sluggish performance, but the degree of recovery will be modest. The trade growth rate was also downgraded. The forecast for the global trade volume growth rate this year was lowered from 3.2% in October last year to 2.9%. While the first phase agreement between the U.S. and China and the cyclical rebound in manufacturing suggest that global trade is bottoming out, risks remain due to political uncertainties such as conflicts between the U.S. and Iran and the possibility of trade frictions. Emerging market growth forecasts diverged between China and India. China's growth forecast was revised upward due to the first phase agreement with the U.S., whereas India's was downgraded due to prolonged domestic demand contraction caused by consumption and investment slowdown and tax revenue decline continuing since last year.

This content was produced with the assistance of AI translation services.