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Financial Focus

German Chancellor Angela Merkel won vital backing from her cabinet for changes to the Eurozone’s main bailout fund yesterday, prompting a short relief rally in the euro. The proposed changes to the European Financial Stability Facility are controversial because they enable it to deploy an enlarged capital pot without returning to paymaster countries for permission, in order to, for example, recapitalize a country’s banks or buy sovereign bonds in the secondary market. The vote now goes to Germany’s lower house for ratification on the 29th of September.

PORTUGAL has announced new austerity measures designed to cut its budget deficit to almost zero in less than five years, promising the biggest cuts in government spending for more than 50 years.

JAPANESE authorities splashed a fresh daily record high of 4.513 trillion yen on currency intervention last month, official data revealed yesterday. The measures were overseen by then minister of finance Yoshihiko Noda who is now Prime Minister. The bank of Japan is believed to have intervened in the currency markets on the 4th of August, temporarily boosting the dollar against the yen.

 MARKETS:

ASIAN stocks climbed, with the regional benchmark index set for its longest streak of gains since January, after manufacturing in China and the U.S. expanded, boosting the outlook for exporters and machinery makers. The MSCI Asia Pacific Index gained 1.1% as of 1:30pm in Tokyo, heading for its highest close since the 4th of August.

FUTURES on the S&P 500 added 0.3% today. In New York the index rose 0.5% yesterday after a report showed orders placed with U.S. factories rose by the most in four months, beating economist’s estimates. Japan’s Nikkei 225 rose 1.4% whilst Australia’s S&P/ASX 200 index gained 0.7%. Hong Kong’s Hang Seng increased 1.5% and South Korea’s Kospi climbed 2%, extending its biggest six day advance since March 2009.

CURRENCIES:

THE YEN fell against 15 of its 16 major counterparts, reaching the lowest level in almost a week against the dollar. The yen snapped a two-day advance versus the euro after a government report showed Japanese investors last week made their largest net purchase of overseas stocks in almost a year.

ENERGY:

OIL advanced from a two-day low in New York as investors speculated that signs of manufacturing growth in China and the U.S. indicate fuel demand will increase in the world’s two biggest crude consumers. Futures gained as much as 0.5% after China’s Purchasing Managers Index and U.S. factory orders climbed.

COMMODITIES:

COPPER declined for the first time in seven days on concerns that China’s plan to tame inflation even as the economy slows may hurt demand for metals. Zinc and lead also fell. Gold may fall for a second day as a rally in global equities trimmed investor demand for haven investments amid speculation the U.S. Federal Reserve may set up measures to stimulate growth.

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