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Financial Focus: 24th January 2011

Euro-hope as bets against the currency disappear;
World Economic Forum to discuss long-term growth cycle;
Asia broadly flat overnight as traders wait on news;
Cocoa prices to jump as Ivory Coast bans exports;
Steel prices may jump by 66% this year.

NEWS:
The German Chancellor, Angela Merkel, made it clear that her country, with the biggest economy in the Eurozone, would do whatever it takes to save the common currency. This message, together with recent support from China and successful Portuguese and Spanish bond auctions, appears to be impacting on investors as demand for contracts used to hedge against a decline in the euro, is disappearing at the fastest pace since September.

A meeting of top political, academic and business minds, will meet in Switzerland this week to discuss the possibility that the world may be entering a long-term growth cycle that has only been seen twice since the Industrial Revolution. US Treasury Secretary Timothy F. Geithner, investor George Soros and 2,500 other respected field-leaders will meet at the World Economic Forum with an agenda that is not, for once, just about crisis-fighting.

A significant jump in the price of cocoa might be on the cards today, as Alassane Ouattara, the President-elect of
Ivory Coast, imposed a one-month export ban in an attempt to oust former president Laurent Gbagbo. Despite international pressure, Gbagbo refuses to leave his position although national elections voted him out. Cocoa is the main source of income for the government and any stoppage in exports would cut the funding that Gbagbo needs to pay the civil servants and military officers keeping him in power.

MARKETS:
The MSCI Asia Pacific index was flat in overnight trading, as traders remain wary of the anti-inflation measures likely in Chia and various central bank meetings due this week. Japan’s Nikkei made progress, however, rising on bargain hunting after last week’s sell-off, as investors were attracted to cheaper resource shares and bought up exporters. The market had its biggest drop in two months last Friday, as energy-related stocks tumbled amid money-tightening fears and profit-taking.

The FTSE 100 rose on Friday as investors snapped up commodity-linked shares that had declined sharply during the previous two days. Analysts commented that this ‘swing trend’ was becoming more noticeable as traders watch for the bargains that come from sudden market falls. The UK index is set to open with little change today, although Germany’s DAX may show a gain of around 11 points, and France’s CAX an advance of 6 points.

CURRENCIES:
The euro backed away from a nine-week high on profit-taking on Monday, although easing Eurozone debt worries supported the single currency. The currency held above the key resistance around $1.3570 that it broke on Friday and speculators turned long on the euro for the fist time in two months.

ENERGY:
Crude oil futures climbed for the first time in five days in New York as the improving economic outlook in the US and Europe increased speculation that fuel demand would increase.

COMMODITIES:
Steel prices are set to jump by up to 66% this year, according to top analysts, which is a level of inflation seen only once before in the past 70 years. The forecast comes from a Financial Times survey that brought together senior executives in the industry, and top steel analysts. The largest increase to date is said to be a 70% gain in 2004 when steel-demand rocketed due to a rapid expansion in the world’s economy.

DATA AT 0700 GMT (FT.COM)
FTSE 100: 5,896 +0.48%
S&P 500: 1,283 +0.24%
Eurofirst 300: 1,148 +0.76%
Nikkei 225: 10,345 +0.69%
Shanghai Comp: 2,704 -0.41%
Dow: 11,872 +0.41%

$ per €: 1.3604 -0.25%
$ per £: 1.5971 -0.14%
¥ per $: 82.75 +0.27%
¥ per €: 112.57 +0.02%
€ per £: 1.1736 +0.09%

WTI Crude: $89.55 +0.49%
Brent Crude: $97.99 +0.40%
Gold: $1,352 +0.84%
Copper: $4.30 0.00%
Corn: $6.60 +0.34%

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