Sentiment Lifted as IMF Indicated to Raise US' Growth Forecast

New York (Dec 23)  We have a short, and likely quiet, week as Christmas is coming. Asian and European shares climbed higher, carrying forward US markets' optimism last week as well as reacting to IMF's upgrade of US economic outlook. In China, money market rates shrugged off the government's money injection and rise for a 7th day. The PBOC announced that it injected more than RMB 300B, or about US$ 50B, in short-term funds to a number of banks over a three-day period last week. The central bank noted that the banking system's excess reserves have exceeded RMB 1.5 trillion. In the commodity sector, gold changed little as prices recovered after a severe selloff last Thursday. The yellow metal would remain under pressure next year. Crude oil prices pared some gains made late last week.

The IMF indicated that it would revise upward US outlook as the country's "growth is picking up". Moreover, as "unemployment is going down", this has given the market "a much stronger outlook for 2014". The IMF also noted that "the budget deal that was cut at year-end is a very good sign of … responsibility, accountability and realism" while adding that the lender would hope that "in February, Congress will be equally responsible and will not threaten the recovery with yet another debate about whether or not the U.S. honor or default". In October, the IMF forecast that US' economy would grow by +1.6% and then by +2.6% in 2014.