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Financial Focus

Stocks in the U.S. dropped last night after Federal Reserve Chief Ben Bernanke acknowledged a slowdown in the economy, but offered no suggestion of a third round of quantitative easing (dubbed QE3). Bernanke noted “slower than expected” growth this year and “frustratingly slow” progress in the labour market, yet remained defiant over the Fed’s controversial asset buying programmes (QE and QE2). “The Fed’s actions in recent years have doubtless helped stabilise the financial system, ease credit conditions, guard against deflation, and promote economic growth,” Bernanke concluded.

THE G20 group of leading nations is to launch an attempt to reduce price volatility in agricultural commodities by collating greater market information on global stocks and production. The Agriculture Market Information System (Amis) comes as the world economy weathers its second food prices shock since 2007 due to production shortfalls, strong demand, and the lowest inventories in decades. “Markets cannot operate blindly, we need reliable information on stocks and production” said Bruno le Maire, French minister of agriculture, who is leading the initiative.

 MARKETS:

EUROPEAN shares are set to fall for a sixth straight session today, tracking falls in Asia after a late reversal on Wall Street following cautious comment from the U.S. Federal Reserve Chairman Ben Bernanke. “Following the recent deluge of poor economic data from the U.S., Bernanke acknowledged that the pace of economic growth in the U.S. was slowing. What really sapped risk appetite from the markets was his silence one a third round of quantitative easing,” said Jonathan Sudaria, dealer at Capital Spreads. The FTSE 100 is expected to open 29 points lower this morning with the German DAX and French CAC 40 following a similar trend opening 38 and 23 points lower respectively.

CURRENCIES:

THE YEN rose against all 16 major counterparts after the IMF said its 26 billion euro loan to Portugal “entails important risks,” spurring demand for Japan’s currency as a refuge. The yen climbed to a one month high against the greenback as Fed President William Dudley said the U.S. “recovery remains distinctly subpar”.

THE EURO fell from near a four week high versus the dollar after German Finance Minister Wolfgang Schaeuble said that bondholders must contribute a “substantial” share to a second aid package for Greece.

ENERGY:

OIL dropped again yesterday, erasing earlier gains, ahead of the OPEC meeting in Vienna today. Futures fell as much as 0.5% after climbing 0.7%. OPEC will raise its production quota for the first time since 2008 to help replace lost Libyan supplies and meet growth in demand later this year. An increase in output targets would help replace missing supplies from Libya and meet demand-growth projections for later on in 2011.

COMMODITIES:

CORN advanced for a second day, with the most active contract maintaining a premium over wheat, on speculation that the U.S. corn crop will be smaller than previously estimated because of planting delays. Corn climbed 0.6% yesterday to $7.365 as wheat ended at $7.3375. That’s the first time since 1984 that corn has been more expensive, according to Bloomberg data.

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