U.S. stocks rise as House passes debt limit bill

IMF Forecasts

The world economy will expand 3.5% this year, less than the 3.6% forecast in October, the Washington-based IMF said today in an update of its World Economic Outlook report. While the fund projects growth this year increasing from last year’s 3.2% pace, it expects the 17-country euro area to shrink 0.2% in 2013, instead of growing 0.2% as forecast in October.

“Is Europe on the mend? I think the answer is yes and no,” IMF Chief Economist Olivier Blanchard said in a video released with the report. “Something has to happen to start growth.”

The yen strengthened against all 16 major counterparts, gaining 0.2% per euro. Europe’s shared currency lost 0.1% to $1.3315.

‘Upward Correction’

The yen will weaken against the U.S. currency by the end of the year, as the BOJ’s decision to hold off on fresh stimulus puts pressure on the government to revive growth through fiscal measures, according to a Bloomberg survey of strategists.

“The yen currently is in an upward correction phase after it weakened rapidly in the past two months,” said Noriaki Murao, managing director of the marketing group at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “The market was somewhat disappointed in that no deadline has been set for the inflation target and that the open-ended asset purchases don’t start until 2014.”

Japan’s top currency official, Takehiko Nakao, said the central bank isn’t engaged in a competitive devaluation of the yen, pushing back against international criticism of the nation’s monetary policy.

“The BOJ’s monetary policy, decided yesterday, is aimed at ending persistent deflation, so criticism that it’s a form of competitive devaluation is misplaced,” Nakao, the Vice Finance Minister, said in an interview in Tokyo today.

The MSCI Emerging Markets Index fell 0.2%. South Korea’s Kospi Index slipped 0.8% as Goldman Sachs Group Inc. cut its economic growth forecast. India’s Sensex index gained 0.2%, Russia’s Micex Index slipped 0.2%. The Shanghai Composite Index added 0.3% before a manufacturing report tomorrow.

Bloomberg News

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