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Financial Focus

ECB President Jean-Claude Trichet is fighting a war on two fronts as he seeks to contain price pressures while the Greek crisis threatens to blow the euro area apart. The ECB will raise interest rates for a second time this year, increasing the benchmark by 25 basis points to 1.5%.

THE LARGEST credit rating agencies, Moody’s, Standard and Poors, and Fitch, were pilloried yesterday for providing ridiculously optimistic advice running up to the financial crisis, deeming bundles of sub-prime mortgages to be as safe as debt of very cautious and successful companies or governments.

CHINA may limit interest-rate increases for the rest of this year as Premier Wen Jiabao bets that a slowing economy will help tame inflation after five moves since October

TREASURIES snapped a two-day gain as economists said a government report today will show the number of Americans continuing to receive jobless benefits fell last month, easing concern the labour market is struggling to grow.

MARKETS:

MOST ASIAN stocks climbed, driving the benchmark index near a two-month high, as Chinese banks rose after the country raised interest rates, boosting lenders margins, and countering losses by Japanese nuclear power-generators.

EUROPEAN shares are set to edge higher today tracking Wall Street ahead of an expected rate rise by the ECB. Yesterday the FTSEurofirst 300 index fell 0.3% snapping a seven-day winning run as euro zone peripheral debt worries resurfaced, China raised interest rates and doubts about growth persisted, fuelled by a weaker-than-expected reading on the U.S. services sector.

CURRENCIES:

THE EURO was 0.3% from a one-week low versus the yen as concern Europe’s debt crisis is spreading and China’s decision to raise interest rates damped demand for higher yielding assets.

ENERGY:

OIL rose from a two-day low in New York as investors bet shrinking stockpiles and signs of economic recovery in the U.S. indicated fuel demand is strengthening in the world’s biggest crude consumer. Futures climbed as much as 0.8% after the American Petroleum Institute said yesterday that inventories dropped 3.2 million barrels last week.

COMMODITIES:

GOLDMAN SACHS kept its overweight recommendation for commodities on a three, six and twelve month horizon as well as its 20% return forecast in the next year. Demand growth is likely to be sufficient to tighten key markets, the bank said. Goldman reiterated its long-trading recommendations for Brent Crude, U.K. Natural Gas, Copper, Zinc and Soybeans.

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