Goldman Sachs cut its global 2012 economic growth forecast to 3.5% from 4.3%. The company expects a mild recession in Germany and France and a deeper downturn in Eurozone’s periphery over next few quarters, economists Jan Hatzius and Dominic Wilson wrote in a note yesterday. Goldman also lowered its three-month forecast for the euro to $1.38 per dollar from an earlier projection for it to trade at $1.40. The common currency will be at 106 yen in three months, compared with a previous estimate of 108 yen, the bank said in a separate report.
Eurozone finance ministers said yesterday that they were reviewing the size of the private sector’s involvement in a second bailout package for Greece, a move that could hasten the threat of a debt default. Ministers also agreed that Greece could wait until mid-November until it receives the next instalment from the existing emergency aid programme, putting further pressure on Athens to resolve its debt problems.
A SURVEY by JPMorgan shows that investors are moving more assets to hedge funds that protect them against extreme events amid the European sovereign debt crisis and global economic recession, reports the FT. Tail-risk funds aim to profit at times of rare events of low probability and extreme impact. They typically bet on dramatic moves in prices and seek to minimise their losses during times of rising or stable prices.
MARKETS:
The MSCI Asia Pacific Index is set for its lowest close since July 2009, but Standard & Poor’s 500 futures increased slightly through the night, after a two-day drop that left the US gauge within 1% of levels commonly seen as a bear market. Chinese financial markets are shut this week for a public holiday.
The S&P 500 slumped yesterday to close at the lowest level since September 2010. The benchmark US stocks gauge has dropped 19% since April, when it climbed to the highest level since 2008.
European shares are set to fall again today, adding to losses recorded in the past two sessions, on mounting expectation of a Greek debt default.
CURRENCIES:
THE EURO touched the lowest level in more than a decade against the yen before reports that may indicate a slowdown in the European economy. The 17-nation currency also reached an eight-month low versus the dollar after European governments signalled bondholders may have to take bigger losses on Greek debt.
ENERGY:
Oil dropped for a third day in New York as investors speculated that Europe’s debt crisis will slow the economy and curb fuel demand as crude supplies climb. Futures slid as much as 2.2% after falling yesterday to the lowest settlement in more than a year.
COMMODITIES:
US GOLD futures jumped 1% on Tuesday as investors dumped equities and turned to bullion on growing fears that a Greek default could trigger another global recession. Credit Suisse raised its 2012 gold price forecast to $1,850 from its prior forecast of $1,540, saying the clear beneficiary of the uncertainty and dislocations in financial markets has further upside with the crises set to continue.
