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Financial Focus

Portugal’s cost of borrowing was close to 10% yesterday, increasing belief that the country needs an international rescue to fend off a sovereign bond default. The yield on Portugal’s five-year bonds rose to 9.91%, which is higher than levels seen in Ireland when Dublin was bailed out in November.

THE RISK is roughly one in seven that Europe’s ongoing debt crisis will push member nations to abandon the shared currency, the Economist Intelligence Unit has warned. The report questions the weaker Eurozone members’ ability to meet its financial commitments, and the stronger states’ patience for an ongoing ‘propping up’ role.

GADDAFI’S call for “international dialogue” to resolve the conflict was met with disbelief yesterday, as European leaders rejected a reported cease-fire proposal and announced their recognition of the rebels’ interim council as the Libya’s only legitimate government.

BLOOMBERG’S survey of economists predict that the ISM report, due out at 10 am New York time, will say that US service industries grew at the fastest pace for more than five years in March, boosting belief that economic expansion is broadening beyond manufacturing.

MARKETS:

A QUIET day on the UK and US markets yesterday, saw the major indexes close up without making any major advance. Commentators believe that more direction will be offered later today when a key US service sector report is published.

THE NIKKEI average slipped more than 1% overnight, with the belief that the post-quake rebound might have run its course. Tokyo Electric Power dropped by as much as 15% at one point, as investor concerns mounted over the financial burdens of its tsunami-hit nuclear power plant. Markets in China, Hong Kong and Taiwan were closed for a holiday.

EUROPEAN markets are expected to remain flat today, as the three-week rally runs out of steam, and oil prices fuel inflation concerns ahead of the ECB’s interest rate decision on Thursday.

CURRENCIES:

THE EURO held below this week’s five-month high against the dollar and 11-month peak versus the yen on Tuesday as investors paused to assess how much it can make in fresh gains given that expectations for interest rate rises have largely been priced in.

ENERGY:

LIBYAN rebels are set to start exporting oil as soon as Tuesday, as they seek funding to sustain their uprising against Gaddafi. In the meantime, oil prices surged past $120 a barrel to reach a 28-month high yesterday, as continued fighting in Libya, and Iran’s refusal to immediately increase supply from the OPEC countries, increased supply worries.

COMMODITIES:

SILVER jumped to its highest levels since early 1980 overnight, although some analysts warned of the metal’s extreme volatility, which has led to some spectacular reversals in recent years.

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