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Financial Focus

EUROPE could be forced to pay for a fourth bailout after Moody’s downgraded Cyprus to just above junk status yesterday, alerting markets to the nation’s precarious fiscal position. The agency cited a trio of disasters to hit the €17.4bn economy in the last quarter, including the accidental destruction of the Vasilikos power plant that fulfills around half of the nation’s energy needs. Moody’s said that the accident will tip the economy into stagnation, forecasting 0% growth this year, and will add to an “increasingly fractious domestic political climate” that could derail its deficit reduction plan.

THE GERMAN finance minister has warned that he will not bail out every troubled euro zone country in a move that rattled confidence in Europe’s response to the debt crisis. Wolfgang Schaeuble explained that the €159bn Greek bailout was a one off.

THE IMF is likely to contribute a smaller share of official financing in the new Greek aid package than it did for the Portuguese and Irish rescue programs. The IMF has pledged to lend €78.5bn to Greece, Ireland and Portugal through 2014. That amount is many times the IMF share holding of these three countries, a growing source of worry to fund officials.

ASIAN stocks dropped the most in two weeks amid signs U.S. economic growth is slowing as the nation continues to struggle to resolve an impasse on raising its debt ceiling. The MSCI Asia pacific Index sank 1.2%, set for the largest loss since July the 12th. Japan’s Nikkei 225 slumped 1.7%, South Korea’s Kospi Index dropped 1% and Australia’s S&P/ASX200 declined 1.6%

EUROPEAN shares are set to fall again today, extending a losing run to four days, as U.S. politicians remain deadlocked over the debt ceiling, and after Wall Street was further hit by disappointing earnings. Wall Street suffered its worst day in eight weeks yesterday, hit by lackluster economic data and no movement in Washington as the deadline for U.S. default looms.

THE YEN gained against all of its 16 major counterparts as concern that the U.S. and Europe will struggle to contain their debt, spurred demand for Japan’s currency as a refuge. The euro fell against the yen and the dollar was 0.3% from a record low against the Swiss franc as U.S. lawmakers remained at odds in Washington.

OIL declined for a second day in New York as investors bet that rising crude supplies and signs of a slowing economy in the U.S. indicate fuel demand may falter. Futures slid as much as 0.9% today after falling to the lowest in almost a week.

THE GLOBAL natural rubber stocks-to-use ration has plunged to the lowest ever level as expanding demand shrinks inventories in China, potentially boosting prices. Global inventories are just enough to meet about a month’s demand compared with supplies for about 6.3 weeks a year earlier.

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