Spreadex Market Update
OECD slashes global growth forecasts and warns of Brexit fallout as gloomy Wednesday continues
The institute went on a bit of a cutting spree this Wednesday, slashing growth forecasts for the UK (down to 1.7% form 2.1% for 2016) and the US (down to 1.8% from 2.0%). Perhaps more pressingly the OECD warned that a Brexit could cause 3% and 1% declines in GDP for the UK and Eurozone respectively by 2020, while stating that the looming EU referendum had already caused UK growth to suffer.
Of course this did nothing to improve the FTSE’s mood, the index sliding by 0.7% as Wednesday went on. It seems that investors are more focused on the potential fallout of a Brexit, and the declining oil price (Brent Crude now back at $49 per barrel), than the day’s data, ignoring the better than expected 50.1 manufacturing PMI reading.
The DAX and CAC only saw their decline increase in pace as the Eurozone-wide manufacturing PMI was confirmed at a 3 month low of 51.5, both indices declining by 0.7-0.8%. Missed forecasts from Italy, Spain and, most damningly, Germany, alongside the continued contraction territory performance from France, ensured the region’s manufacturing sector remained in trouble across May.
Things are unlikely to improve this afternoon, the Dow futures pointing to a near 50 point fall at the US open following on from yesterday’s 100 point slide. The USA’s own manufacturing sector isn’t looking too pretty at the moment, something the Markit and ISM PMIs (both expected at a meagre 50.5) will likely confirm after the bell.
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