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Financial Focus

US Federal Reserve members agreed that their asset-purchasing programme should continue, but minutes of their March meeting revealed that some participants feel a move away from the loose monetary policy will be warranted later in the year, and were less certain about the need for the pace or overall size of the bond purchase programme in QE2.

MARKETS:

THE FTSE 100 index ended in the red yesterday, following a sluggish trading day where investors seemed reluctant to take strong positions ahead of the Fed’s meeting, held after market-close, and key interest rate decisions being made later in the week. European shares settled lower too, as Moody’s issued its second downgrade on Portugal in less than a month.

CHINA and Hong Kong were up through the night, with investors shrugging off Beijing’s fourth interest rate increase since October. Some analysts said the rate rise would be net positive for banks, and finance sector shares boosted the Shanghai Composite Index.

EUROPEAN shares were set to edge up on Wednesday, extending a rally that has taken them to their highest in nearly four weeks on optimism about economic growth, with traders expected to remain cautious ahead of an expected interest rate rise by the ECB on Thursday. The European benchmark index is up more than 77% from its lifetime low of March 9th 2009, helped by stimulus from central banks and governments worldwide.

CURRENCIES:

THE YEN extended its decline in early Asian trading, hitting fresh 11-month lows against the euro and the Australian dollar and looking to deepen its losses as technical support levels threaten to give way.

ENERGY:

BRENT crude jumped to a 2½-year peak above $122 a barrel on Tuesday, gaining for a fourth straight day as conflict and unrest in Africa and the Middle East more than offset China’s latest interest rate hike.

COMMODITIES:

GOLD firmed overnight and held near the lifetime high hit in the previous session, as inflation fears lingered after crude and corn rallied to new peaks. US corn futures, spurred on by thin stateside supplies, edged off its peak overnight. Silver also edged down, having risen to its strongest level in more than three decades.

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