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Financial Focus: 6th January 2011

Encouraging US jobs data helps FTSE higher;
Mixed data out of the Eurozone;
Investors cautious with Portuguese debt;
Japanese stocks rise to 7-month high;
US markets viewing Friday’s non-payroll data.

The biggest economic news on Wednesday was the US ADP non- farm employment survey, which beat predictions with a rise of 297,000 in private payrolls. The ADP report is considered a good indicator for payroll figures expected in the US this Friday.

Wednesday’s economic announcements out of Europe were mixed. Industrial new orders for the Eurozone rose by 1.4% in October, after a decrease of 2.5% in September. The final reading of the Services Purchasing Managers’ Index for December, however, was confirmed lower month-on-month.

An auction of Portuguese debt required sharply higher yields, demonstrating investors’ ongoing concerns and distrust of
Eurozone paper. Portugal sold €500m of six-month treasury bills at an average yield of 3.69%, higher than the 2.05% in September’s auction, hinting that many are still wary that the nation will still need a bailout.

The FTSE struggled below Tuesday’s closing price for most of the session on Wednesday, but was lifted by strong employment data coming out of the States after lunch.  The FTSE 100 added 30 points for the day, ending up 0.50% at 6,043.

The S&P 500 index also rose by 0.50% to close at 1,277, its highest level since early September 2008.  Analysts predict a muted opening today, as investors wait for the non-farm payrolls data due out on Friday of this week.
Japanese stocks rose, driving markets to new highs since May 2010, after faster-than-estimated growth in US
payrolls and service industries boosted optimism that the economic upturn in the States is sustainable.

Continuing Eurozone fears, refocused during the Portuguese debt auction, started a move towards the dollar as the
euro was sold off. The euro’s problems, coupled with the signs of strong recovery in the US, sent the greenback to
its biggest gain in three months against the yen.

Oil traded above $90 per barrel for a second day in New York, despite the strength of the dollar, which can often make the commodity too expensive for investors.  This is seen to be further confidence in a strengthening US economy, but mixed trading through the night in Asia suggests that the commodity remains price-sensitive.

Gold, seen as a safe-haven during tough economic times, suffered losses for the fourth day, producing the worst run in seven weeks for the precious metal.  Having reached a record $1,376.10 per ounce at the start of December, gold has lost 3.2% this week.  Silver made a slight recovery during overnight trading, although it has lost 4.9% this year following its incredible rise of 83% in 2010.

In contrast to precious metals, commodities linked to manufacturing are making the most of the confident signs coming from US data.  Rubber added as much as 5.7% this week, and copper rebounded from its biggest intraday drop in more than a month yesterday.

FTSE 100: 6,044 +0.50%
S&P 500: 1,277 +0.50%
Eurofirst 300: 1,142 +0.04%
Nikkei 225: 10,530 +1.44%
Shanghai Comp: 2,826 -0.45%

$ per €: 1.3145 -0.02%
$ per £: 1.5507 -0.08%
¥ per $: 83.17 -0.11%
¥ per €: 109.33 -0.13%
€ per £: 1.1796 -0.05%

WTI Crude: $90.28 -0.02%
Brent Crude: $95.33 -0.18%
Gold: $1,375 +0.08%
Copper: $4.41 +0.22%
Corn: $6.17 -0.32%

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