Volatility gripped the world markets in January 2016 as global economic growth seems to be slowing down. The International Monetary Fund’s (IMF) World Economic Outlook in January downgraded global growth by 0.2% for both 2016 and 2017, to 3.4% and 3.6%, respectively. The World Bank projects global growth at a rate of 2.9% for 2016 in its January 2016 Global Economic Prospects report. This has led to global markets ending in the red last month. However, Bank of Japan’s decision to go for negative interest rates surprised the markets, which helped limit the losses in the last week of January. Further, the European Central Bank hinted that it would ease its policy by cutting its deposit rate in March, and this helped European markets limit losses. France’s CAC40 was down by over 5%, and the FTSE 100 by 3%.
The US S&P 500 index was down by 5.9% while Dow Jones fell by close to 4% during the month. The US Federal Reserve kept rates on hold last month and did not give any indications whether it would hike rates in March. This added to the negative sentiments in US, while continuing Chinese slowdown and volatile commodity prices contributed to the gloomy picture in Asia.
