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Financial Focus

Portugal moved closer to an EU bailout, as its largest banks were downgraded by S&P. The ECB revealed it was forced to buy government bonds worth 432m euros in an attempt to keep Potuguese yields down after the defeat of its austerity budget last week. Debt has reached record heights of 8.3%.

Irish banks seem to be edging close to another rescue after reports that the ECB could agree a 35bn euro funding lifeline. The results of stress tests on Ireland’s financial system are expected to reveal an imminent need for a 25bn capital injection on Thursday. New prime minister, Enda Kenny has been negotiating to secure international funding. Irish debt reached 10.7%.

David Cameron and Nicolas Sarkozy issued a joint statement yesterday calling for Qaddafi supporters to move their support to the Interim National Transitional Council, which has been recognised by Qatar as the legitimate representative body for Libya. Rebel forces have taken control of the bulk of Libya’s oil installations, and are pushing back Qaddafi’s forces with the assistance of NATO air strikes. The US has also confirmed that it has frozen $33bn worth of Libyan assets.

MARKETS:

THE GLOBAL shares rally has come to an end for now, as speculation grows that US Fed officials may review the use of quantitative easing, as US market optimism increases. Although European markets made small gains yesterday, the FTSE All-World equity index is down 0.3% following a weak session in Asia overnight. While the Fed’s rumours on QE2 might not be enough to halt the current market move on their own, investors also have renewed Eurozone debt worries, Japan’s broken supply chain, and Middle East uprisings to concern them.

FINANCIAL spreadbetters expect European shares to slip today, following a late sell off on Wall Street yesterday, and tracking Asian stocks lower. UK investors will be cautious ahead of UK GDP data, due to be released this morning.

CURRENCIES:

THE YEN traded towards a one-week low against the dollar on speculation that reports will show US employers added jobs, and that French consumer spending has rebounded. THE DOLLAR appreciated as the US fed suggested that they might not complete a second round of bond purchases. THE EURO was supported yesterday by the ECB president’s comments that Eurozone inflation is increasing, which strengthened expectations that the bank will raise interest rates next month.

ENERGY:

OIL prices eased as Libyan opposition took control of the country’s main oil installations, and as Qatar recognised the new rebel council.

COMMODITIES:

GOLD prices are little changed, but may be set to decline as indications the US economy is entering a phase of more sustained growth reduces demand for the precious metal as an alternative investment.

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