Financial markets remain strong in European session as driven by optimistic growth forecasts. WTI crude oil moves with a firm tone around 75, the highest level in a week, while gold hovers around 1200.

The US Energy Department revised up its forecasts on global oil demand. Driven by growth from non-OECD countries, oil demand is expected to increase +1.85% y/y to 85.82M bpd in 2010, followed by a +1.72% increase to 87.29M bpd in 2011. The forecasts were upgraded from June's projections. On the supply side, non-OPEC production is also revised by to 50.98M bpd (June: 50.86M bpd) and 50.9M bpd (June: 50.68M bpd) for 2010 and 2011 respectively. This indicates lower demand for OPEC's supply.

For natural gas, demand forecast for 2010 was lowered to 64.67 bcf/day from 64.93 bcf/day projected in June while that for 2011 was upgraded slightly to 64.76 bcf/day from June's estimate of 64.6 bcf/day. The +3.49% annual growth in 2010 was mainly driven by rise in industrial and electric power consumption. In 2011, the growth will be virtually flat as consumption growth in the residential, commercial, and industrial sectors in 2011 will be offset by decline in consumption in the electric power sector 'because of the forecast increase in natural gas prices relative to coal prices next year'.

IMF upgraded its growth outlook for 2010 despite market concerns that sovereign crisis in the Eurozone may damped global economic recovery. In its quarterly report, IMF forecast world GDP will expand at about +4.6% in 2010 and +4.3% in 2011. The +0.4% upgrade in 2010's reading was driven by stronger-than-expected activities in 1H10. However, the world lender stressed that the forecasts were based on assumptions that countries, especially those in the Eurozone, would adhere to policies in rebuilding confidence and stability. The IMF stated 'policy efforts in advanced economies should focus on credible fiscal consolidation, notably measures that enhance medium-run growth prospects, such as reforms to entitlement and tax systems. Supported by accommodative monetary conditions, fiscal actions should be complemented by financial sector reform and structural reforms to enhance growth and competitiveness. Policies in emerging economies should also help rebalance global demand, including through structural reforms and, in some cases, greater exchange rate flexibility'.

Fiscal tightening measures will reflect in slower growth in 2011 in the Eurozone. While keeping the 2010 growth outlook at +1%, the IMF downwardly revised the 16-nation region's 2011 growth, by 0.2%, to +1.3%.

The BOE announced to leave the official Bank Rate paid on commercial bank reserves at 0.5% and maintain the asset purchase program at 200B pound. Tight fiscal measures announced in June will likely keep its accommodative monetary stance longer. However, against the backdrop of heightened inflationary pressure and lower economic growth, policymakers would have engage in vigorous debates regarding when to begin hiking interest rates.

The ECB is expected to leave the main refinancing rate unchanged at 1%. Money market rates have soared as expiry of the 442B-euro 12-month LTRO reduced liquidity. We expect ECB's President Trichet will face questions regarding the issue. Currently, economists forecast the central bank will announce other refinancing operations sooner or later so as to lower the rates.