In its China Economic Outlook, the IMF downgraded its forecast for the nation's 2012 growth from 9 per cent to 8.2 per cent and warned it could be slashed further under its "downside" scenario for the global economy.
"In the unfortunate event such a downside scenario becomes reality, China should respond with a significant fiscal package, executed through central and local government budgets," the IMF said.
Germany's Angela Merkel expressed frustration with a decision by Greece to postpone their decision on the terms under which the nation can secure a lifeline of 130 billion euros for yet another day.
"I honestly can't understand how additional days will help. Time is of the essence. A lot is at stake for the entire euro zone," Merkel told a news conference with France's Nicolas Sarkozy.
Greek political leaders are resisting pressure by the EU and IMF for additional austerity measures, including a cut in the minimum wage.
"We refuse to [accept] a Greek bankruptcy. We can't accept that," Merkel told ZDF German TV according to the channel's website.
The euro suffered, dropping as much as 1 per cent to US$1.3028. It last traded 0.6 per cent weaker on the day against both the greenback and the yen.
The euro has shed 4.7 per cent over the past three months, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes.
Meanwhile, the recent strength in equities with the S&P 500 posting its best start in 25 years has failed to restore confidence; in fact, it's scaring investors, according to Bloomberg.
Sentiment is the worst since the early 1980s, when 17 years of equity market stagnation gave way to the biggest rally in history.
"Investors are scared to death," Philip Orlando, the New York-based chief equity strategist at Federated Investors, told Bloomberg. "The fears are justified, but from a valuation standpoint the market has overshot, as it typically does. We've been pounding the table to put money into equities."
