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European shares fall as IMF cuts its forecasts for global growth

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European shares are lower again Tuesday, reversing a positive open amid concerns over the outlook for global growth. Continued fears the Italian government is on course to clash with the EU over its budget spending plans, added to the downbeat tone.

By 1215 BST, the EUROSTOXX 600 was down 0.40%, while the EUROSTOXX 50 had lost 0.45%. Regional bourses were also lower. The German DAX was 0.50% in the red, the French CAC was off 0.34%, the Spanish IBEX fell 0.18% and the Italian MIB was 0.26% in negative territory.

IMF cuts global growth forecast

The International Monetary Forum (IMF) released its latest global growth forecast update, earlier Tuesday. The body warned that the ongoing US-China trade dispute is set to have a negative impact on global economic growth.

The IMF said it now expects global GDP growth of 3.7% in both 2018 and 2019 – down from its previous expectations for 3.9% expansion in both years. The IMF also cut its growth forecasts for the US and China by 0.2 percentage points.

“Notwithstanding the present demand momentum, we have downgraded our 2019 US growth forecast owing to the recently enacted tariffs on a wide range of imports from China and China’s retaliation,” the IMF’s chief economist, Maurice Obstfeld, said.

Italian banks suffer, again

Adding to that downbeat news, was the likelihood that Italy and the EU remain on a collision course over the country’s budget plans.

In an address to parliament, Italy’s economic minister, Giovanni Tria, said that now was the time for a constructive discussion with Europe, over Italy’s spending plans.

“There will now be a constructive discussion with Europe to show the well-founded reasons for this government's growth strategy,” Tria said.

However, how successful that conversation will be, remains unknown and currently, the view is they will struggle to come to a suitable agreement.

Against that backdrop, Italian bank shares are once again in the red:

  • UniCredit shares fell 1.15% to €11.83.
  • Intesa Sanpaolo shares lost 0.42% to trade at €2.02.
  • Banco BPM shares, declined 1.67% to hit €1.82.

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