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Financial Focus

Fears over inflation in China prompted another rise in the amount that banks are forced to hand over as reserves yesterday. The reserve ratio requirement (RRR) was hiked by 0.5% to 20.5% last night, to be effective from 21st April. It marked the fourth 0.5% increase in this year, and seventh since November. The RRR hike will lock up about 350bn yuan (£32.8bn) of cash that banks would otherwise be able to lend.

Portugal’s 85bn rescue could be delayed by a surge of EU bailout resistance in Finland, where the eurosceptic True Finns looked on course for a stunning result by taking 19% of the vote in parliamentary elections last night, making it likely the party could be part of a new coalition government. Finland is unusual among Eurozone states in requiring a majority parliamentary vote for major decisions regarding the EU, and the Eurozone’s current temporary bailout facility requires a unanimous vote of all 17-member states to dispense aid.

SAUDI Arabia’s oil minister said yesterday the Kingdom had slashed output by 800,000 barrels per day in March due to oversupply, sending a clear signal that OPEC will not act to lower prices. Consuming countries have urged the group to increase supply to put a cap on oil prices, which surged to more than $127 a barrel this month, its highest level in 2½ years.

MARKETS:

EUROPEAN stocks ended slightly higher on Friday, but posted their first weekly loss in a month as Eurozone debt worries prompted investors to take the profits from recent lofty gains. THE FTSE looks set to build on Friday’s gains and break through the psychologically significant 6,000 barrier, with defensive stocks providing the momentum. US STOCKS rose on Friday, but the market’s recent struggles are set to continue into this week when more than one-fifth of S&P 500 companies report results.

ASIAN stocks rose overnight as investors bet that China’s latest round of policy tightening won’t dent prospects of a global economic recovery. The move was not a surprise as market players had predicted more tightening after last week’s data showed that inflation had accelerated.

CURRENCIES:

THE EURO suffered broad losses as a raft of bad news in the form of Finland’s anti-euro party making big gains in a parliamentary election on Sunday and talk of a Greek debt restructuring prompted traders to take profits into a recent rally. But the common currency is expected to be supported by prospects of another interest rate hike after the recent quarter point increase, as data showed euro zone inflation climbed higher than expected in March.

ENERGY:

US CRUDE futures headed lower towards $109 a barrel as traders took profits after three days of gains despite comments by Saudi Arabia confirming a cut in crude production to counter an oversupplied market.

COMMODITIES:

GOLD jumped to another record high on Friday, and silver reached a 31-year high, after the dollar fell to its lowest since late 2009 against a basket of major currencies. London copper prices briefly dropped 0.5% while Shanghai copper prices also dipped slightly after Beijing’s latest round of monetary tightening.

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