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Financial Focus

US POLITICIANS moved one step closer last night to approving an eleventh-hour deal to raise the country’s debt ceiling, and hope to avoid the prospect of a default that would throw the global markets into chaos. Members of the Republican controlled House or Representatives voted 269-161 in favour of the proposed plan, which will lift the debt ceiling by $2.4 trillion before the end of the year through a programme of spending cuts that politicians have spent recent weeks furiously debating.

BANKS in the biggest emerging markets are losing the confidence of investors as loans turn sour after a two year credit binge. Brazil’s financial shares have lost more this year that counterparts in Europe as consumer defaults hit a 12 month high in June and borrowing costs climbed 46%. China are trading at lower valuations than global emerging-market indexes for the first time since 2006, and in India the cost of insuring banks against default has climbed to the highest level in a year.

MARKETS:

ASIAN stocks fell, snapping the benchmarks index’s biggest gain in nine weeks, and Treasury yields were two basis points away from this year’s low amid signs the U.S. recovery is slowing. The MSCI Asia Pacific Index lost 1.7% at 1:35pm in Tokyo. Standard & Poor’s 500 index futures slid 0.3% following a six day slump.

EUROPEAN shares are set to open flat to lower today with shares poised to extend a week long slide, after gloomy U.S. manufacturing data sparked worries over the outlook for the global economy. Concerns that Washington’s last minute deal to raise the country’s debt ceiling and cut its budget deficit will not be enough to prevent a credit downgrade, also kept investors on edge.

CURRENCIES:

THE YEN fell against most of its major peers after gains, to the brink of a record against the dollar, stoked speculation that Japan will intervene in currency markets. The yen dropped against the euro for the first time in five days after Japanese Finance Minister Yoshihiko Noda said the nation’s currency is overvalued and he’s watching the markets closely.

ENERGY:

OIL traded near the lowest in more than a month as signs the U.S. economy is slowing countered speculation that the world’s biggest crude consumer will be able to solve its debt crisis. Crude for September delivery traded down 7 cents having earlier risen as much as 56 cents. Brent oil for September settlement dropped 33 cents a barrel on the London based ICE futures Europe exchange.

COMMODITIES:

GOLD advanced toward a record as concern that global economic growth may be slowing, overshadowed a U.S debt deal reached in time to avert a default, spurring demand for wealth protection. Soy bean futures advanced for a second day after the condition of the U.S. crop worsened last week amid hot, dry weather across the Midwest, a government report showed. Wheat futures also increased.

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