International Monetary Fund cut its global growth forecasts for the third time in less than a year

Market Outlook Global

MUMBAI, (GNI): International Monetary Fund cut its global growth forecasts for the third time in less than a year on as new figures from Beijing showed that the Chinese economy grew at its slowest rate in a quarter of a century in 2015. IMF cited a sharp slowdown in China trade and weak commodity prices that are hammering Brazil and other emerging markets. Fund forecast that the world economy would grow at 3.4% in 2016 and 3.6% in 2017, both years down 0.2% point from the previous estimates made last October. It said policymakers should consider ways to bolster short-term demand. IMF maintained its previous China growth forecasts of 6.3% t in 2016 and 6.0% in 2017, which represent sharp slowdowns from 2015.China reported that growth for 2015 hit 6.9% after a year in which the world’s second biggest economy endured huge capital outflows, a slide in the currency and a summer stock market crash. Fund said the outlook for an acceleration of U.S. output was dimming as dollar strength weighs on manufacturing and lower oil prices curtail energy investment. It now projects U.S. economic growth at 2.6% for both 2016 and 2017, down 0.2% point in both years from the October forecast.In Europe, lower oil prices will help support private consumption, so the IMF said it added 0.1% point to its 2016 euro area growth forecast, bringing it to 1.7%, where it will remain for 2017. Brazil will stay mired in recession in 2016, with output contracting 3.5%, a 2.5% point downward shift from the previous forecast, and there will be essentially no growth in 2017 as Latin America’s largest economy struggles with lower Chinese demand.

Morgan Stanley belt-tightening is becoming a way of life. Investment bank posted better-than-forecast fourth-quarter results largely thanks to greater cost cutting, including moves to slash 25% of its fixed income headcount to adapt to a protracted slump in bond trading. CEO James Gorman is focusing on ways to cut even more deeply, leaning on technology and increased outsourcing to cut another $1 bn in costs this year. Morgan Stanley plans to lean on technology and outsourcing to reach its latest cost-cutting target. Wall Street banks are grappling with regulations discouraging them from risky trades along with concern about China, oil prices, an uncertain interest rate climate and weak IPO activity. Morgan Stanley is cutting a quarter of the jobs at its fixed income business, revenue from which fell 8.2% in the fourth quarter.  Compensation expense dropped dramatically during the quarter to $3.7 bn including a severance expense, from $5.1 bn a year ago. In institutional securities, which include banking and trading, compensation expense was 37%, below the bank’s goal of 39%. Morgan Stanley’s non-interest costs fell 41% and compensation costs fell by nearly a third. Its after-tax legal bill stood at $2.9 bn in the fourth quarter of 2014 as it settled litigation related to mortgage-backed securities and crisis-era issues. Morgan Stanley’s adjusted net revenue fell 4.3% to $7.86 bn in the quarter ended Dec. 31 as revenue declined in every major business but one – equity sales and trading. Morgan Stanley reported earnings of $753 mn, or 39 cents per share, applicable to common shareholders, compared with a year-earlier loss.

U.S. consumer prices unexpectedly fell in December as the cost of gasoline dropped and rents rose moderately, signs of weak inflation that further diminish expectations of a Federal Reserve interest rate hike in March. Other data showed a drop in housing starts and building permits last month, adding to weak reports on retail sales, industrial production, exports, inventory and manufacturing surveys that have suggested a significant slowdown in economic growth at the end 2015. Labor Department said its Consumer Price Index slipped 0.1% after being unchanged in November. Despite that drop, the CPI increased 0.7% in the 12 months through December, the biggest rise in a year. That followed a 0.5 % gain in November. Consumer prices increased 0.7% in 2015, the second smallest December-December gain in the last 50 years, , after rising 0.8% in 2014. Core CPI, which strips out food and energy costs, edged up 0.1% in December after advancing 0.2% in each of the prior three months. In the 12 months through December, the core CPI increased 2.1%, the largest gain since July 2012, after climbing 2.0% in November. The Fed tracks a price measure that is running well below the core CPI. Commerce Department said housing starts dropped 2.5% to a seasonally adjusted annual pace of 1.15 mn units as groundbreaking on both single- and multi-family projects fell. Impact of unseasonably warm weather was likely offset by heavy rains in some parts of the country. Starts rose 10.3% last year to their highest level since 2007. Building permits declined 3.9% to a 1.23 mn-unit rate in December, pulled down by an 11.4% plunge in permits for multi-family buildings. Permits for the construction of single-family homes rose 1.8% last month.

International Business Machines Corp said it bought Ustream Inc, an online video streaming service provider, to boost its cloud offerings for businesses. Ustream, which counts NASA, Samsung Electronics Co Ltd, Facebook Inc, Nike Inc and Discovery Channel among its customers, offers both live and on-demand video to about 80 mn viewers per month. IBM did not disclose the financial terms of the deal. However, the Fortune magazine reported on Wednesday, citing sources familiar with the deal, that the transaction could be valued at $130 mn. IBM has been shifting away from hardware by selling low-margin businesses such as low-end servers and semiconductors to focus on high-margin products such as cloud-based services, mobile security and big data. The new businesses have so far failed to make up for revenue lost to divestitures. Company reported that revenue dropped to $22.06 bn in the quarter ended Dec. 31 from $24.11 bn a year earlier. Revenue from the cloud business jumped 57 percent to $10.2 billion.