Daily Agenda: IMF Sees Wealth Divide Widening

IMF projections see U.S. slowdown, problems in commodity-centric emerging markets; BlackRock slashes some ETF fees; U.S. oil supply dips; VP candidates battle.


Many experts are now predicting that global growth will track sideways in the coming five quarters. At the same time, many of those same experts argue that this may not tell the whole story. The International Monetary Fund’s semiannual World Economic Outlook report, issued yesterday, concluded that a trend of divergence in growth patterns among the wealthy and developing economies will expand in 2017. While GDP projections improved for India and remained strong for China, IMF economists have concluded that commodity-centric emerging economies continue to face significant hurdles. Full-year prospects for the U.S. and European Union also dimmed, with 2017 projections for the euro zone also reduced as the EU faces challenges from weakening southern members such as Italy and Spain, as well as the effect of Brexit. For now, as the central banks of the world’s wealthiest nations retreat from extraordinary monetary policy, the question facing many allocators is whether the flow of assets towards emerging-market equities in recent quarters presages a slowdown in prospects for corporate-earnings growth at home as growth cools.

BlackRock cuts ETF fees. New York–headquartered BlackRock, the world’s largest asset management firm, announced a reduction of management fees for 15 of its most popular exchange-traded funds, with the Standard & Poor’s 500 index vehicle slashing its 7-basis-point fee to 5 basis points. The move comes as ETF providers prepare for new fiduciary standards imposed by the Department of Labor for retirement accounts that will require advisers to focus on costs to clients. As BlackRock competes with other low-cost providers for passive investors — notably Vanguard — many analysts anticipate that smaller asset managers will be forced to follow suit.

Oil rises on reduced U.S. supply data. Futures contracts for West Texas Intermediate-grade crude oil rose in early trading today. Contracts for front-month delivery were flirting with $50 per barrel, after a report from the American Petroleum Institute indicated that U.S. inventories declined this past week. Consensus forecasts for Energy Information Administration stockpile data scheduled for release later today call for a rebound in supplies after last week’s surprising 1.9-million-barrel drawdown. In separate news, multiple media outlets reported today that National Iranian Oil Co. agreed to supply natural-gas condensate to BP beginning last month, in a move that represents one of the first major transactions with a major Western energy company since international sanctions against Iran were lifted.

U.K. service sector stronger than expected. Markit PMI data released today indicates that the U.K. service sector heated up in September. At 52.6 for the headline-activity index, the reading was the second consecutive positive result, defying expectations for a pullback in consumption following the June vote to depart from the EU. Taken in with recent industrial indicators, some analysts now conclude that the U.K. economy may prove to be more resilient to Brexit fallout than initially estimated, potentially leading the Bank of England to delay stimulus measures.

Vice-presidential debate features Democrats on offense. Indiana Governor Mike Pence attempted to reverse perceptions of his GOP running mate, taking a measured tone during the vice-presidential debate held at Longwood University in Virginia as his opponent, Democratic VP nominee Tim Kaine, went on the offensive. With interruptions and attacks on Republican hopeful Donald Trump, Kaine was largely unsuccessful in drawing rebuttals from Pence, who denied Trump said many of the things the Democrat charged. While most political analysts concluded that Pence had a stronger showing in the debate, early polling suggests it has had little impact on the course of the race.

Twitter to seek a buyer. Media reports today indicate that Twitter has begun a long-rumored process of exploring interest in a takeout of the social media firm. The move follows a reported overture by Salesforce.com CEO Marc Benioff, who has reportedly been vocal about the attractiveness of Twitter in the context of his firm’s core data and cloud-storage franchises. Salesforce was outbid by Microsoft for LinkedIn earlier this year. Slowing user growth at Twitter has fed investor speculation that the firm would seek a suitor.