Optimism over US economy shores up markets

Written By Unknown on Senin, 23 Desember 2013 | 23.16

AMSTERDAM — World stocks traded higher on Monday despite concerns over a cash crunch in China as investor sentiment remained buoyed by growing optimism over the U.S. economy.

However, with many traders already off for the Christmas break, volumes were low and are expected to remain so at least until the New Year.

Figures Friday showed the U.S. grew at an annualized rate of 4.1 percent in the third quarter of the year, up from the previous estimate of 3.6 percent. The unexpected strength prompted International Monetary Fund chief Christine Lagarde to say the Washington D.C.-based institution would raise its 2014 U.S. growth forecast from the current estimate of 2.5 percent.

"Sentiment was helped after it emerged the IMF said it will raise its outlook for the U.S.," said Lee Mumford, a trader at Spreadex.

In data released Monday, the Commerce Department said consumer spending rose 0.5 percent in November and core consumer prices rose 0.1 percent from October, for a subdued 1.1 percent annual inflation rate.

In Europe, stocks opened higher and drifted upward. Shortly before the start of U.S. trade, Britain's FTSE 100 index was up 0.7 percent to 6,653, France's CAC 40 rose 0.1 percent to 4,198, and Germany's DAX was up 0.7 percent to 9,455.

U.S. stocks appeared set for further gains after Friday's record close, with Dow futures up 54 points to 16,235 and the broader S&P 500 index futures up 9 points to 1,823.

Earlier in Asia, China's Shanghai Composite rose 0.2 percent to 2,089.71 — its first gain in nine sessions — while Hong Kong's Hang Seng index rose 0.5 percent to 22,921.56. South Korea's KOSPI rose 0.7 percent to 1,996.89. Tokyo stock markets were closed for the Emperor's Birthday.

Stock markets have largely held their own despite worries over China's credit markets. Even though the Chinese monetary authorities injected more cash into the markets, the rate banks charge each other for 7-day loans spiked to 9.8 percent at one point Monday, up from 4.3 percent at the start of the month.

"The tightening of liquidity conditions in China heading into year-end continues to attract some broader financial market attention," said Lee Hardman, an analyst at Bank of Tokyo-Mitsubishi UFJ.

Elsewhere, trading was fairly muted. In the currency markets, the euro was 0.2 percent stronger against the dollar at $1.367 and the dollar fell 0.2 percent against the yen to 103.91 yen. In the oil markets, a barrel of benchmark crude was 20 cents lower at $98.10.

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AP Business writer Youkyung Lee contributed to this story from Seoul, South Korea


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