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Financial Focus

LIBYA’S central bank governor, Farhat Omar Bengdara, emailed the FT last night to deny rumours that he had quit and to insist that he is in Istanbul where it is easier to conduct his business. Bengdara is thought to be one of few officials with the authority to shift funds when sanctions are restricting Gaddafi and his family.

THE BRITISH Retail Consortium reported that retail prices rose by 2.7% in February, the highest reading since November 2008. Retailers have reacted to increases in VAT, commodities and oil prices, but despite the inflationary pressures, all 61 economists in Bloomberg’s survey expect the MPC to keep interest rates at a record-low 0.5% when it meets tomorrow.

MARKETS:

YESTERDAY, the FTSE 100 rallied to close flat after a volatile session. The falling oil price and strength in the auto sector led European markets up, although the banking sector came under pressure as they face more stringent stress-tests this Summer. US banking stocks improved through the session, offsetting the losses in the oil sector resulting from falling crude prices.

OVERNIGHT Asian stocks were mainly up, helped by lower oil prices and robust machinery orders in Japan. The FTSE All-World and MSCI Asia Pacific indexes were both up 0.3%, although traders remain concerned that Middle East tensions may increase later this week.

TODAY, European shares are set to fall after gains in the previous session, with investors concerned about Eurozone sovereign debt after Spain paid a premium to sell new debt via syndication in the previous session and Moody’s downgrading of Greece. Bond yields have risen across the Eurozone and analysts are worried that Portugal will pay higher borrowing costs at its debt auction today.

CURRENCIES:

STERLING fell for a fourth straight day to reach a one-week low against the dollar, after falling UK retail sales and declining house prices weakened the case for an increase in interest rates this year. The euro nursed heavy losses in early overnight trading as worries about European sovereign debt problems surfaced again.

ENERGY:

OIL prices retreated overnight, but analysts believe that the possible escalation of Middle East unrest, particularly in Saudi Arabia, could mean a return to the oil-rally that has pushed prices to record highs.

COMMODITIES:

GOLD steadied after dropping during the previous session, and analysts expect any fall in precious metal prices to be temporary if violence worsens in Libya or neighbouring countries. Inflationary pressures and currency worries drove gold up 30% last year, and to an all time high on March 7th, the same day that silver reached its highest level since 1980.

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