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The International Monetary Fund has cut down the global growth forecast to 4% for 2011 as against the earlier expectation of 4.3%.

The forecast for 2012 has also been cut to 4% versus the earlier 4.5%. The IMF also observed that unless Europe and the United States tackle their economic problems that could infect the rest of the world, the chances of a recession next year could not be ruled out.

The IMF further said, any effort by the United States to pare its massive public debt without bringing in more revenue and tackling expensive benefit programs will lack credibility.

In the lowest volume session since late August, the US markets gave up earlier gains of about 1% as investors were wary of going home with long positions after an overnight downgrade of Italy's credit rating.

The US markets ended little changed as investors waited to see if the US Federal Reserve would offer more economic stimulus and if Greece made progress in talks to avoid a default.

Events to watch out for:

At the end of its two-day meeting on Wednesday, the Fed is expected to announce plans to intervene in the bond market to push long-term interest rates -- already near historic lows -- even lower in a move known as Operation Twist.

Existing home sales data for August comes out today. Consensus figures indicate a rise in US homes to 4.75 million as against 4.67 million in July.

Meanwhile, the weekly crude inventory data too comes out today.

And in Europe, the markets ended higher despite IMF report which warned of a weak and bumpy path to global economic recovery.

European Commission states that Greece has made "good progress" in talks with international monetary officials over reforms that the debt-crippled country must make to keep receiving rescue loans. Talks will continue at this weekend's IMF World Bank meetings and heads of the ECB, EU and the IMF are due back in Athens next week to resume the review, including policy discussions.

But public backlash against Austerity measures mounts. More layoffs in the public sector are expected over the next four years.

Meanwhile, Italian Prime Minister Silvio Berlusconi has expectedly lashed out at Standard and Poor's for downgrading the country's credit rating, saying it did not reflect reality.

Asian markets:

For all developing Asia , the IMF lowered its forecasts to 8.2% growth in 2011 and 8.0% growth in 2012, from its June forecast of 8.4% growth for both years.

At 7: 41 am (IST), Asian markets were trading lower. China's Shanghai Composite was flat at 2,446.02.

Currency market:

Euro gains versus the dollar, currently above 1.37.

Commodities market:

Crude prices holds above USD 110 dollar levels as financial markets get a lift from hopes that the US Federal Reserve's policy panel could act to boost the economy.

Gold advanced back to USD 1,800 per ounce levels as European debt concerns spur demand for the precious metal as an alternative investment. Gold is currently soft in Asia trade.

Local market:

The IMF forecast India's economy to grow 7.8% in 2011 and 7.5% in 2012, down from its June forecasts of 8.2% and 7.8%, respectively.

Yesterday, the Nifty surged 108 points to close just below the 5,150. The Sensex too showed off gains to close 353 points higher at 17,099.

India's foreign debt level has risen to a historic high in FY11. At the end of FY11, total residual short-term debt stood at nearly 28% of total external debt that's against 25% a year ago, reports CNBC-TV18.

Stocks in News:

Future Group is in talks for a JV with Japanese based Convenience Store Chain. Japenese company will invest Rs 3,000 crore in first tranche.

HDIL may sell Virar Land to raise Rs 650 crore and repay its debt.

NTPC may use spare land to cross acquisition hurdle.

L&T is set to partner Hindustan Shipyard for ship building.

Vini Amesar.

vini.amesar@network18online.com