For good or bad, the World Bank update merely reminded us that analysts who had grabbed those economic green shoots and turned them into larger shrubs were wrong.
The Federal Reserve will confirm that in the early hours of tomorrow morning by leaving interest rates at record lows because the US economy is still gripped by recession.
In fact some US analysts think the Fed will go out of its way to play down any fears of inflation and will emphasise that it sees rates remaining low for quite a while yet.
That will be done to hammer home to the band of overly optimistic analysts who see rebound, growth and inflation in every corner of the economy at the moment.
Their forecasts border on the absurd, especially with unemployment expected to rise to close to 10% in the US and closer to 11% in Europe in the next year to 18 months.
The World Bank was in effect playing catch up with some previous updates from other global groups.
It got in two days ahead of an update from the Organisation for Economic Co-Operation and Development (OECD), which is due to release its latest forecasts within the next day (Including Australia).
These will include the forecasts for the 30 member nations of the organisation, plus comments on other major economies outside it, such as China and India. That will come at 6.30 tonight, Sydney time.
The bank’s global outlook is more pessimistic than the forecast by its sister organization, the International Monetary Fund.
The IMF forecast for this year calls for a global contraction of 1.3%, with growth returning to 2.4% in 2010.
The reaction to the World Bank report (much of which was said on June 11) was to confirm the wisdom of US corporate executives bailing out of their company’s shares.
Yesterday we reported on one survey that showed executives at half the Standard & Poor’s 500 companies had sold shares from early March onwards, as the markets rebounded.
According to data based on Securities and Exchange Commission filings monitored by another group called TrimTabs, share sales by company insiders have outstripped purchases so far this month by more than 22 times.
TrimTabs reported that insiders of S&P 500 listed companies have unloaded $US2.6 billion in shares in June, compared with $US120 million in purchases.
Better the profits (or a larger amount of cash from selling shares at a loss) than to be stuck in a stock where the management is voting with its feet.
What they can envisage is a recovery without growth, a rebound in activity without any demand stimulus, other than from inventory rebuilding.
And if retailers and the like reckon demand will be weak, they won’t be doing a great deal of rebuilding of inventories anyway.
The news came as the markets were shaken (for no real reason, it must be said) by a report from the World Bank on the global economy.
All the World Bank said was that the world economy will perform worse than expected at in March.
In fact you could describe the World Bank’s update as a wake up call, a timely reminder to green shoot enthusiasts that their favourite plants have a very tenuous hold on reality.
And it wreaked a lot of damage on markets overnight, despite being all but ignored in Asian markets late Monday.
The update came during afternoon trading in Asian markets and they shrugged off its headline of growth in the region, thanks to solid performances by China and India.
The worse global forecast was ignored, but not by markets in Europe and the US where there were sharp falls.
Wall Street ended down 2% to 3%, or 200 points on the Dow; gold fell, as did copper, oil lost nearly 4% to end down at $US67.06 a barrel in New York, the US dollar rose on increased nervousness and US interest rates fell sharply with the 10 year bond finishing at 3.70%.
European markets also fell sharply and the MSCI Global Index lost 2.7% in value as the stumbling days of January and February were recalled.
Stocks suffered their worst one-day loss in two months, dropping the S&P 500 back into negative territory for the year on Monday in a broad-based sell-off, as investors reconsidered the health of the economy.
The S&P 500 fell 3.06% to 893.04 – its first close below 900 this month and analysts noted that the index closed below its 50-day and 200-day moving averages.
Instead of a rebound, some analysts are now claiming the move up from March has been a "correction" which could be retraced.
Analysts said investors were keen to sell shares that led the market up in its rally since early March.
Our market fell yesterday, losing 3%.
Major averages have largely been trading sideways in recent weeks and many investors have speculated that the market rally had run out of strength and was starting to look for a reason to self correct.
Coming after markets last week had their sharpest sell off in a month, with falls of 3% to 5% for most.
More in Russia, which fell 7.8% on Monday night and is now down 22% in the past 10 days and is the first market to move into a new bear phase after rebounding strongly since March.
That is in fact the first bear market of 2009, a dubious distinction for a government and economy that was grabbing at every green shoot it could last week at a summit with China, India and Brazil.
What the World Bank said in its forecast was hardly earth shattering; it merely confirmed what has been apparent for several months.
That is, for all the talk of green shoots and China’s rebounding growth (which the World Bank updated to a 7.2% growth rate forecast
