The PBoC injected about $42 billion in short-term liquidity
overnight into the financial system to help keep money market rates
tame as the Chinese lunar new year holiday approaches. Short-term
repurchase rates had spiked as the seasonal surge in cash demand
caused liquidity to dry up at banks. Emerging market equities were
under pressure as a result, which spread into developed market
The IMF raised its global growth forecast for 2014 to 3.7% from its
prior forecast of 3.6% in October of last year. This move had been
discussed by IMF Managing Director Christine Lagarde over the past
two weeks. The fund's 2014 US growth forecast was raised to 2.8%
from 2.6%, China was raised to 7.5% from 7.3%, and the eurozone was
forecast at 1%. The IMF sees the risk of very low inflation in
advanced economies and doesn't expect the Fed to raise its main
interest rate until 2015. Most importantly, it warned that emerging
markets will need to manage capital-flow reversal risk if growth
waned any further.
US equities were mixed today; the
Dow Jones Industrial Average
(INDEXDJX:.DJI) lagged due to underperformance from its financial
members and a less-than-stellar earnings report from Johnson &
). The benchmark
(INDEXSP:.INX) rose as well as the tech-based
(INDEXNASDAQ:.IXIC). The gains in the S&P were led by utilities
and materials stocks. Telecom-sector stocks were the worst off,
declining more than 1%.
) released its fourth-quarter earnings 10 days ahead of schedule
due to its results falling well short of investor expectations. The
company suffered a net loss after one-time charges from litigation,
reorganization, and a drop in fixed income trading revenue hurt its
bottom line. Deutsche Bank announced a pre-tax net loss of 1.2
billion euros vs. an estimated net profit of 628.5 million.
Investment banks such as
) were notable underperformers.
Tomorrow's Financial Outlook
There will be no major economic data releases tomorrow in the US.
The Mortgage Bankers Association will release its weekly mortgage
application index for the week ending January 17. Earnings reports
should dominate tomorrow's trading. Notable companies that are
scheduled to report include
In the UK, December 2013's jobless claims change will be reported
in addition to the minutes from the Bank of England's monetary
policy meeting two weeks ago. Most importantly, the Bank of Japan
will release its monetary statement for 2014 and target for its
expansion of the monetary base. Strategists are expecting no change
from the BoJ.