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US stocks tumble after IMF downgrades global growth

Anna Fedorova
Written By:
Anna Fedorova

Markets in the US fell overnight, after the International Monetary Fund (IMF) cut its forecast for global growth for the next two years.

The IMF said it now expected global growth of 3.3 per cent this year, down from the 3.4 per cent it predicted in July, while next year’s forecast was cut to 3.8 per cent, from 4 per cent.

In particular, it expects the eurozone to see meagre growth of 0.8 per cent this year and 1.3 per cent next year, with some 40 per cent chance it will fall into another recession.

Its forecasts for Russia, Middle East and Japan are no more optimistic, with outlooks for each of these regions downgraded sharply.

The downgrades across Europe and parts of Asia caused a sell-off in the US overnight; the S&P 500 closed down 1.5 per cent, while the Dow Jones and Nasdaq both shed 1.6 per cent.

Asian markets also closed lower, with the Nikkei 225 off 1.2 per cent and Hong Kong’s Hang Seng 0.7 per cent lower.

While the majority of the latest report made grim reading, the international organisation praised the UK economy as the fastest growing of the G7 countries, with 3.2 per cent growth forecast for this year, and 2.7 per cent for 2015.

Expectations for the US are also high, as it received a sharp upgrade to its outlook for this year to 2.2 per cent growth, with the IMF expecting the weakness in the economy at the start of the year to be “mostly temporary”.

Markets in Europe have started the day weaker, with Germany’s DAX falling 1.3 per ent, and France’s CAC-40, Spain’s IBEX-35 and Italy’s FTSE MIB shedding 1.8 per cent, 2 per cent and 1.7 per ecnt, respectively.