OECD Downgrades G20 Growth Outlook Amid Rising Oil Prices

The OECD has revised its growth forecasts for the G20 economies, lowering expectations for 2025 from 3.3% to 3.1%, and for 2026 from 3.2% to 2.9%. This downgrade is attributed to increasing trade barriers and political uncertainties that hinder investment and consumer spending.

In the updated projections, the United States is anticipated to grow by 2.2% in 2025, a decrease from previous estimates of 2.4%, and by 1.6% in 2026, down from 2.1%. Canada’s growth predictions were cut significantly to 0.7% for both years, down from a prior estimate of 2%. Mexico is also expected to experience decline, with forecasts showing a contraction of 1.3% in 2025 and 0.6% in 2026.

In Europe, the Eurozone's growth is now projected to be 1.0% in 2025, reduced from 1.3%, and 1.2% in 2026, a slight increase from 1.5%. Major economies like Germany, France, and Italy saw their growth projections lowered, although Spain received an upgrade. The UK's outlook has also worsened, with expected growth of 1.4% in 2025, down from 1.7%, and 1.2% in 2026, from 1.3%.

On the commodities front, oil prices have risen for three consecutive sessions, with WTI crude hitting $67.8 per barrel. This rise is primarily due to concerns over potential supply disruptions linked to ongoing conflicts in the Middle East. Recently, Israel has intensified its military operations in the Gaza Strip, which are the first significant strikes since January's truce. Additionally, US President Trump has stated that Iran will be held accountable for any actions taken by Yemen's Houthis, which may add more pressure in the region.

Meanwhile, on Wall Street, stock markets have shown a positive start to the week. The Dow Jones (US30) increased by 0.85%, while the S&P 500 Index (US500) and the Nasdaq Technology Index (US100) rose by 0.64% and 0.55%, respectively. This optimism is partly fueled by retail sales data that came in below expectations, showing a modest increase of only 0.2% for February. The data has led to speculations that the Federal Reserve might consider lowering interest rates later this year.

Despite the overall market rally, some major tech stocks failed to keep pace, with Tesla dropping 4.8% and Nvidia falling 1.7%. Concerns regarding high valuations coupled with ongoing economic uncertainties have weighed on these companies. Finance Minister Bessent described the market correction as "healthy," while also noting the persistent risks of recession.

In Canada, the currency strengthened to 1.43 CAD per USD, reaching a three-week high. This improvement is driven by easing trade tensions, a weaker US dollar, and a better outlook for foreign investments. Officials indicate that US-Canada trade discussions have advanced, leading to tentative agreements to phase out retaliatory tariffs and stabilize essential trade flows.

Market Reactions in Europe

European equity markets saw a boost yesterday, with Germany’s DAX climbing 0.73%, France’s CAC 40 up by 0.57%, Spain’s IBEX 35 gaining 1.09%, and the UK’s FTSE 100 closing 0.56% higher. Traders in Germany are closely monitoring an upcoming vote on the nation's spending plan that, if passed, would exempt defense expenditures from debt restrictions and establish a €500 billion infrastructure investment fund.

Asian Market Trends

Asian markets also experienced upward momentum, with Japan’s Nikkei 225 increasing by 0.93%, China’s FTSE China A50 gaining 0.06%, Hong Kong’s Hang Seng rising by 0.77%, and Australia’s ASX 200 gaining 0.90%. Recent Chinese economic data highlighted accelerating retail sales and robust industrial production, although high urban unemployment and lower factory output tempered optimism. Amid increasing trade tensions, President Trump has announced an upcoming visit from Xi Jinping, though no official dates have been set.

Further contributing to market sentiment, the New Zealand dollar is trading near US$0.581, its highest level since early December, buoyed by positive news regarding China's economic outlook and consumer spending initiatives. The continued decline of the US dollar has also supported the antipodean currency.

Upcoming Economic Indicators

Investors are looking ahead to several important economic announcements, including consumer price index data from Canada and building permits and industrial production figures from the US, which are expected to provide further insights into economic conditions.

OECD, Growth, Oil