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Financial Focus

Japan’s sovereign-rating outlook was cut to ‘negative’ by Standard & Poor’s on Wednesday amid concerns that reconstruction needs after last month’s earthquake will add to what is already the world’s biggest debt load. S&P lowered its outlook at from ‘stable’, after reducing the rating by one notch to AA- in January, which is its first cut since 2002.

EUROPEAN sovereign borrowing costs rose yesterday as the official 2010 deficit league table, published by Eurostat, showed Ireland at the top with a deficit equal to 32.4% of GDP. Greece’s 2010 deficit figures were revised upwards to 10.5%, with the UK close on its heels with 10.4.

SWITZERLAND’S biggest bank UBS, which needed a £8bn bailout in 2008, saw a surge in new fund inflows in the first three months of 2011, as it reported better-than-expected Q1 results yesterday. Clients placed SwFr11.1bn (£7.6bn) of net new funds with UBS’ wealth management division, the highest level since the end of 2007, as trust in the bank returned. This turned around the outflow of SwFr8bn in Q3 of 2010, and pushed the division’s profit up 40%.

MARKETS:

THE FTSE 100 closed at its highest level in over two months yesterday, prompting some pundits to claim that the index could break through 6,100 points this week. Good corporate results in the US helped the S&P 500 through the 1,344 level, seen as a key resistance point, and left the index at its highest level since June 2008.

ASIAN stocks gained on Wednesday, lifting the region’s benchmark index to an eight-week high, amid signs the global economy is improving and on strong corporate earnings. Hong Kong shares edged upwards, with financials receiving a lift in anticipation of strong earnings from Chinese banks while property stocks, underperformers this month, saw bargain-hunting ahead of a land auction. Japan’s Nikkei stock average rose as exporters recouped some of the previous day’s losses.

EUROPEAN shares are expected to open flat to slightly higher on Wednesday, with strong company results boosting sentiment, and investors cautious ahead of the outcome of the US Fed’s two-day policy meeting.

CURRENCIES:

THE DOLLAR fell to a 16-month low against the euro on speculation the US Fed is considering ways to support the US economy as it ends its bond-buying programme in June. The dollar could come under further pressure if the Fed retains its low interest rates while the ECB is poised to deliver further rate rises to curb inflation.

ENERGY:

PRESIDENT Barack Obama urged world oil producers to lift crude output yesterday, as he sought to deflect public anger over high gasoline prices that have hurt his popularity among voters. US motor fuel prices have become a heated political issue after pushing toward $4 a gallon. Gasoline futures hit 33-month highs on Tuesday.

COMMODITIES:

SILVER rebounded overnight from sharp falls in the previous session, and gold inched upwards as investors cautiously awaited the conclusion of the US Fed’s policy meeting. The strength in silver prices may sustain, as the metal is expected to benefit from increasing industrial demand in tandem with recovering global economy.

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