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Financial Focus: 27th October 2010

UK growth is double the forecast at 0.8%;
US trade figures better than expected;
Aussie dollar slumps after surprising tame inflation data.

SHARES:
Taken aback by the UK’s 0.8% Q3 growth, investors seem to be weighing up the likely influences on the FTSE 100 and wider indices. With little economic and corporate news due out today, it is likely that they will watch and wait, persuading analysts that the FTSE 100 may move back below 5,700. Global markets are also struggling for momentum, although the US indices managed to post small gains in the last session.

FOREX:
The British pound surged as quantitative easing worries fell away on the back of the UK GDP news yesterday. The currency was further strengthened by Standard & Poor’s confirmation of Britain’s AAA credit rating. The dollar gained against the majors in Asian trade, buoyed by a second day of good economic data out of the US. The Aussie dollar was the loser, sinking against most currencies after their Q3 Consumer Price Index fell short of expectations.

GILTS:
UK gilt yields spiked strongly yesterday after the UK’s strong Q3 growth. Prices on all longer dated gilts are more than £1 lower, while the 2015 gilt has dropped 73p. Charteris’ Ian Williams, manager of the £100m City Financial Strategic Gilt fund, is warning investors of dramatic losses for the asset class, advising them to ‘batten down the hatches’.

ENERGY:
A predicted surge in U.S. crude inventory data dragged down oil prices in Asian trade on Wednesday. New York’s main contract, light sweet crude for delivery in December, shed 30 cents to $82.25 a barrel. Brent North Sea crude for December delivery dipped 24 cents to $83.42.

METALS:
Precious metal prices ended mixed yesterday at Comex. Gold prices ended marginally lower after a volatile day of trading, but silver zoomed ahead of gold and ended with decent gains. Prices were a bit volatile today following the dollar firming up and erasing all of its prior day’s losses.

INDEX CLOSING PRICES:
DJIA: 11169.46 / +5.41 / +0.05%
Nasdaq: 2497.29 / +6.44 / +0.26%
S&P 500: 1185.64 / +0.02 / +0.00%
FTSE 100: 5707.30 / -44.68 / -0.78%
FTSE 250: 10940.72 / -37.42 / -0.34%
Nikkei 225: 9377.18 / -0.20 / +0.00%

FOREX PRICES AT 0350 GMT:
USD/JPY: 81.71 / -75 / +0.33%
EUR/USD: 1.3817 / -19 / -0.25%
GBP/USD: 1.5825 / -30 / -0.09%
EUR/GBP: 0.8728 / -32 / -0.17%

COMMODITY PRICES AT 0350 GMT:
Comex Gold: $1338.30 / +$0.10 / 0.0%
Brent Crude Oil: $83.42 / -$0.24 / -0.3%

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