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Financial Focus

Federal Reserve policy makers will meet today as the unprecedented downgrade of the US top credit rating increases the likelihood that America’s recovery will falter. Strategists suggest that the Fed may prolong a pledge to maintain record monetary stimulus.

CHINA’s inflation accelerated to the fastest pace in three years, limiting the scope for monetary easing in the economy that had led the rebound from the global recession in 2009.

Moody’s reiterated yesterday that it affirmed the US government’s top Aaa ranking because the dollar’s status as the main reserve currency allows it to support higher debt levels. Fitch Ratings affirmed its AAA grade for the US last week.

GERMANY said that it remained opposed to expanding the European Financial Stability Facility, just hours after the ECB agreed to buy Italian and Spanish bonds, in an attempt to prevent financial market chaos.

SHORT-SELLING will be banned on the Athens bourse for two months starting this morning, Greece’s stock market regulator said yesterday. The Athens bourse index closed down 6% last night, a fall nearly twice as steep as that of European peers.

MARKETS:

THE GLOBAL rout in equities engulfed Asia’s stock markets, sending indexes in the region’s six biggest markets down more than 20% from recent highs after the US credit rating cut and China’s accelerating inflation.

THE S&P 500 sank 6.7% yesterday, its worst one-day decline since December 2008, leaving valuations at the cheapest in more than two years. Investors fled from riskier assets on the first trading day after S&P’s downgrade, seeking refuge in Treasuries, gold, and the Swiss franc.

THE FTSE 100 fell for the seventh consecutive trading day on Monday, with investors continuing to drop stocks in favour of safer assets, unconvinced that governments and central banks have a grip on the global debt crisis.

European shares are set to plummet today, tracking steep falls on Wall Street and in Asia as investors panicked over the US’ loss of its top credit rating and the paltry efforts of world leaders to calm worries over growth and debt.

CURRENCIES:

The yen has clawed back almost all of its loss against the dollar last week when Japan carried out an estimated $58.4 billion in sales of its currency, underscoring the nation’s haven status for investors fleeing debt crises.

ENERGY:

CRUDE oil headed for its biggest two-day plunge in more than two years in New York as the US credit rating cut and rising stockpiles stoked concern an economic slowdown will worsen, reducing demand in the world’s biggest crude consumer. Brent tumbled below $100 a barrel.

COMMODITIES:

Commodities plunged to their lowest level in eight months, extending two weeks of losses, on concern that the global equity rout will slow the economy, eroding demand. GOLD for immediate delivery jumped as much as 3.1% to a record $1,772.38 an ounce.

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