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IMF sees global economy improving despite uncertainties – FRANCE 24

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Issued on: 30/03/2021 – 17:26Modified: 30/03/2021 – 17:24

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Washington (AFP)

Economic growth led by the United States and China is accelerating, amplifying the risks of an uneven global recovery, the head of the IMF said Tuesday.

“In January we projected global growth at 5.5 percent in 2021,” said IMF Chief Kristalina Georgieva in an address ahead of the body’s annual spring meeting cohosted with the World Bank.

“We now expect a further acceleration,” she said ahead of the international organization’s official update of its forecast in a week.

Key factors in the improved outlook includes the US passage of President Joe Biden’s $1.9 trillion economic relief package and an expected bounce from coronavirus vaccines increasingly available in larger economies, Georgieva said.

She also praised the “extraordinary effort” of workers throughout the health care universe, including doctors, nurses and vaccine scientists.

Governments played a key role in averting a worldwide depression, Georgieva said, with some $16 trillion in fiscal support and a “massive liquidity injection by central banks” averting complete disaster.

Without these steps, the worldwide economic contraction of 3.5 percent in 2020 “would have been at least three times worse,” she said.

– ‘Extremely high uncertainty’ –

But the IMF is seeing increasing signs of a “multi-speed recovery” powered by the United States and China, which are on track to enjoy growth by the end of 2021 that outpaces their pre-crisis performance.

In general, the global outlook remains clouded by “extremely high uncertainty,” with economic activity still tied closely to the pandemic.

“So much depends on the path of the pandemic — which is now shaped by uneven progress in vaccination and the new virus strains that are holding back growth prospects, especially in Europe and Latin America,” she said.

Especially vulnerable are emerging markets with more “fragile” government.

“Many are highly exposed to hard-hit sectors, such as tourism,” she said. “Now they face less access to vaccines and even less room in their budgets.”

A keen worry in a global economy fractured by different-paced recoveries would be a sudden rise in US growth that leads to a jump in interest rates and capital flight from emerging regions.

“We expect inflation to remain contained, but faster US recovery could cause a rapid rise in interest rates, which could lead to a sharp tightening of financial conditions — and significant capital outflows from emerging and developing economies,” she said.

Georgieva urges generous investment in the production and distribution of vaccines to facilitate the transition to the post-Covid economy.

She also backs increased investment for the most vulnerable countries, as well as spending on infrastructure, health and education so that “everyone can benefit from the historic transformation to greener and smarter economies.”

This group of nations requires $200 billion over five years to overcome the pandemic and another $250 billion to return to a trajectory of meeting richer countries, said Georgieva, citing a recent IMF study.

The IMF has already provided $107 billion in financing and debt service relief for the 29 nation poorest nations. This includes support for sub-Saharan Africa at about 13 times the level previously.

Support within the international organization is also building for lending some $650 billion in special drawing rights to aid the most vulnerable nations, she said.

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Economy

CANADA STOCKS – TSX ends flat at 19,228.03

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* The Toronto Stock Exchange’s TSX falls 0.00 percent to 19,228.03

* Leading the index were Corus Entertainment Inc <CJRb.TO​>, up 7.0%, Methanex Corp​, up 6.4%, and Canaccord Genuity Group Inc​, higher by 5.5%.

* Lagging shares were Denison Mines Corp​​, down 7.0%, Trillium Therapeutics Inc​, down 7.0%, and Nexgen Energy Ltd​, lower by 5.7%.

* On the TSX 93 issues rose and 128 fell as a 0.7-to-1 ratio favored decliners. There were 26 new highs and no new lows, with total volume of 183.7 million shares.

* The most heavily traded shares by volume were Toronto-dominion Bank, Nutrien Ltd and Organigram Holdings Inc.

* The TSX’s energy group fell 1.61 points, or 1.4%, while the financials sector climbed 0.67 points, or 0.2%.

* West Texas Intermediate crude futures fell 0.44%, or $0.26, to $59.34 a barrel. Brent crude  fell 0.24%, or $0.15, to $63.05 [O/R]

* The TSX is up 10.3% for the year.

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Canadian dollar outshines G10 peers, boosted by jobs surge

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Canadian dollar

By Fergal Smith

TORONTO (Reuters) – The Canadian dollar advanced against its broadly stronger U.S. counterpart on Friday as data showing the economy added far more jobs than expected in March offset lower oil prices, with the loonie also gaining for the week.

Canada added 303,100 jobs in March, triple analyst expectations, driven by the recovery across sectors hit by shutdowns in December and January to curb the new coronavirus.

“The Canadian economy keeps beating expectations,” said Michael Goshko, corporate risk manager at Western Union Business Solutions. “It seems like the economy is adapting to these closures and restrictions.”

Stronger-than-expected economic growth could pull forward the timing of the first interest rate hike by the Bank of Canada, Goshko said.

The central bank has signaled that its benchmark rate will stay at a record low of 0.25% until 2023. It is due to update its economic forecasts on April 21, when some analysts expect it to cut bond purchases.

The Canadian dollar was trading 0.3% higher at 1.2530 to the greenback, or 79.81 U.S. cents, the biggest gain among G10 currencies. For the week, it was also up 0.3%.

Still, speculators have cut their bullish bets on the Canadian dollar to the lowest since December, data from the U.S. Commodity Futures Trading Commission showed. As of April 6, net long positions had fallen to 2,690 contracts from 6,518 in the prior week.

The price of oil, one of Canada‘s major exports, was pressured by rising supplies from major producers. U.S. crude prices settled 0.5% lower at $59.32 a barrel, while the U.S. dollar gained ground against a basket of major currencies, supported by higher U.S. Treasury yields.

Canadian government bond yields also climbed and the curve steepened, with the 10-year up 4.1 basis points at 1.502%.

 

(Reporting by Fergal Smith; Editing by Andrea Ricci)

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Economy

Canadian dollar rebounds from one-week low ahead of jobs data

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Canadian dollar

By Fergal Smith

TORONTO (Reuters) -The Canadian dollar strengthened against its U.S. counterpart on Thursday, recovering from a one-week low the day before, as the level of oil prices bolstered the medium-term outlook for the currency and ahead of domestic jobs data on Friday.

The Canadian dollar was trading 0.4% higher at 1.2560 to the greenback, or 79.62 U.S. cents. On Wednesday, it touched its weakest intraday level since March 31 at 1.2634.

“We have seen partial retracement from the decline over the last couple of days,” said Greg Anderson, global head of foreign exchange strategy at BMO Capital Markets.

“With oil prices where they are – let’s call WCS still at roughly $49 a barrel – I still think CAD has room to strengthen over the medium term and even over a one-week horizon.”

Western Canadian Select (WCS), the heavy blend of oil that Canada produces, trades at a discount to the U.S. benchmark. U.S. crude futures settled 0.3% lower at $59.60 a barrel, but were up nearly 80% since last November.

The S&P 500 closed at a record high as Treasury yields fell following softer-than-anticipated labor market data, while the U.S. dollar fell to a two-week low against a basket of major currencies.

Canada‘s employment report for March, due on Friday, could offer clues on the Bank of Canada‘s policy outlook. The central bank has become more upbeat about prospects for economic growth, while some strategists expect it to cut bond purchases at its next interest rate announcement on April 21.

On a more cautious note for the economy, Ontario, Canada‘s most populous province, initiated a four-week stay-at-home order as it battles a third wave of the COVID-19 pandemic.

Canadian government bond yields were lower across a flatter curve in sympathy with U.S. Treasuries. The 10-year fell 3.3 basis points to 1.469%.

(Reporting by Fergal Smith;Editing by Alison Williams and Jonathan Oatis)

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