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Financial Focus: 14th December 2010

Asian stocks gain but rate-rise worries limit China;
Portuguese PM seeks to reassure nervous investors;
Moody’s calculate €17bn shortfall for Spanish banks;
Euro stocks close on 6.5% gain and two-year high;
The euro makes gains overnight.

NEWS:
Asian markets progressed upwards overnight, with South Korea reaching a three-year high.  Investors limited the gains in China, however, with fears that Beijing are still looking to tighten monetary policy in the country.

Jose Socrates, Portugal’s Prime Minister, sought to reassure investors yesterday, explaining that the Portuguese government were taking the actions necessary to correct the financial problems caused entirely by the global crisis.  Mr Socrates’ statements come before a summit of EU leaders on Thursday, where Portugal’s vulnerabilities are likely to be discussed.

The credit rating agency, Moody’s, calculate that the country’s property market bubble has left Spanish commercial and unlisted savings banks needing about €17bn to cope with unrealised losses in their domestic operations.

EQUITIES:
The Nikkei rose 0.2%, and a late recovery in China saw the Shanghai index end flat overnight, following a near 3% rise during the previous session.

The European stocks rally, leading to a 6.5% rise in two weeks on the Eurofirst 300 index, may ease back today according to analysts and financial bookmakers.  On Monday, the index closed at a new high since September 2008, and the technical analysts feel that it is close to being ‘overbought’ and ‘ripe for a pullback’.

Following a light-trade day on Monday, which saw the index gain 0.8%, the FTSE is seen edging lower as investors wait for UK inflation data and the Fed’s latest committee announcement.  Analysts feel that investors are nervous about taking the FTSE through 5,875, indicating that the sideways price action might hint at near-term weakness.

CURRENCY:
The euro was close to three-week highs against a broadly weaker dollar in thin overnight Asian trading.  Traders claim that the rise was due to solid buying from Asian central banks, overwhelming hedge fund selling. The dollar’s decline also followed an abrupt drop in US Treasury yields and Moody’s warning that it could move a step closer to cutting the US AAA credit rating.

ENERGY:
Oil prices fell on Tuesday, as investors remain focused on the possible tightening of China’s monetary policy, and ahead of the US oil-industry stocks data.  The cold weather in Europe and the US continues to add to oil demand, however, and analysts predict further rises in prices if China’s economy is allowed to grow without increased interest rates.

METALS:
Spot gold edged higher in Asian trading, with investors waiting for the US Fed’s announcements on interest rates and the wider economic situation in the States.  Spot silver edged up 0.3% to $1,397 an ounce. LME 3-month copper was at $9,187.50 per ton, down $37.50, but still is not far from Monday’s record high of $9,248/ton.

DATA AT 0700 GMT (FT.COM)
FTSE 100: 5,861 +0.82%
S&P 500: 1,240 0.00%
Eurofirst 300: 1,129 +0.33%
Nikkei 225: 10,317 +0.22%
Shanghai Comp: 2,923 0.00%

$ per €: 1.3414 +0.20%
$ per £: 1.5867 +0.07%
¥ per $: 83.44 +0.04%
¥ per €: 111.93 +0.24%
€ per £: 1.1827 -0.10%

WTI Crude: $88.50 -0.12%
Brent Crude: $91.12 -0.08%
Gold: $1,404 +0.46%
Copper: $4.21 +0.14%
Corn: $5.75 -0.13%

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