US interest rates are falling, commodity prices are weakening and share markets are slowly down as investors seem to be positioning themselves for more bad news.

In fact, sharemarkets are now back where they were in late April when investors were starting to talk about things called “green shoots”. The nature and sustainability of those shoots are being questioned as the US second quarter earnings season approaches, accompanies by another bout of jitters in the markets about stability.

Yields on US 10 year bonds hit 3.3% in New York overnight, down from 4% a month ago, oil is trading around $US60, down from the 8 month high of $US73 9 days ago, and the lowest for two months; sharemarkerts have lost 10% and are starting to correct by falling 10% from the most recent highs a month ago. Copper is down 8%; gold is down to two month lows as well.

Investors worry that second quarter earnings in the US won’t be strong. Alcoa, the big aluminium company was the first major to report, with a smaller than expected loss and higher sales. But while the shares rose in late trading, a closer look at the figures showed the better performance came from cost cuts and closing metal producing and processing facilities, not from higher demand.

The IMF however believes the global economy will do a bit better next year, but not before doing a bit worse than expected this year.

“Economic growth during 2009-10 is now projected to be about half percentage points higher than forecast by the IMF in April, reaching 2.5 percent in 2010, according to the World Economic Outlook Update, published on July 8. Among the major economies, growth rates have been marked up mainly for the United States and Japan.” The Fund had forecast 2010 growth at 1.9% in April.

The more pessimistic outlook for 2009 was largely driven by conditions in Europe, where the IMF now expects Germany’s economy to shrink by 6.2% and Italy’s by 5.1%.

The real story was that the global growth figure is being kept aloft from strongish performances in China, India and several smaller economies, such as Australia. For the major advanced economies, its little growth for the next 18 months.