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Optimism over US economy shores up markets

AMSTERDAM/HONG KONG -- 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 Europe, Britain's FTSE 100 index was up 0.4 percent to 6,635 by midmorning, while France's CAC 40 was fractionally higher at 4,195. Germany's DAX was the best performer, up 0.5 percent to 9,442.

U.S. stocks appeared set for further gains after Friday's record close, with Dow futures up 0.3 percent and the broader S&P 500 index futures 0.5-percent higher.

Stock markets have largely held their own despite worries over China's credit markets.

Asian markets climbed on Monday following a record lead from Wall Street after U.S. economic growth figures came in well above expectations.

Chinese shares picked up after the mainland's central bank last week injected funds into financial markets to calm fears of a cash crunch.

Dealers welcomed a huge injection of liquidity into financial markets last week by the central People's Bank of China after interbank borrowing rates — which lenders charge each other to borrow cash — shot up.

The bank pumped 300 billion yuan (US$49.4 billion) into the market, sending rates falling from 8.2 percent on Friday to 5.57 percent in early trade on Monday.

The turmoil last week came as banks and other investors scrambled for cash as they approach the end of the year, when they typically have to meet regulatory requirements and funding demands from companies.

However, Amy Lin, an analyst at Capital Securities told Dow Jones Newswires: “The market is clouded by concerns of a liquidity crunch. Sharp rises in stock indexes are unlikely in the coming month.

“All eyes are on the central bank now, with hopes it could continue to inject funds into the market.”

Sydney climbed 0.51 percent, or 26.7 points, to end at 5,291.9 and Seoul rose 0.68 percent, or 13.54 points, to close at 1,996.89.

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