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Financial Focus

Fitch Ratings warned today that it might downgrade the credit rating of China within two years and there was a greater than even chance of a downgrade of Japan’s credit status. Both Standard & Poor’s and Moody’s have cut their credit ratings on Japan this year because of concerns about the country’s high public debt.

GERMANY’s top court yesterday ruled against a series of lawsuits aimed at blocking German participation in emergency loan packages, but handed the country’s parliament a greater say over Eurozone bailouts, which could hamper Berlin’s ability to act swiftly to counter a debt crisis that has plagued the zone for two years.

THE CHINESE newspaper ‘the Securities Times’ reported the government may boost interest rates this month or next, which added to investors’ concerns as economists predict that China’s August consumer price index data, due out tomorrow, may increase 6.2% from a year earlier.

THE ITALIAN Senate approved Prime Minister Silvio Berlusconi’s revised austerity plan yesterday, setting up a final vote in the Chamber of Deputies as Italy seeks to stem surging bond yields.

MARKETS:

European shares are expected to rise today, tracking strong gains on Wall Street and on hopes the ECB will halt its interest rate rise cycle to help boost the struggling economy.

Asian stocks swung between gains and losses as jobs decline in Australia, share sale concerns and a report that China may raise interest rates countered speculation the US will do more to stimulate economic growth.

Futures on S&P 500 fell overnight, indicating the 2.9% gain yesterday may be pared back today. The Index gained yesterday as President Barack Obama prepared to unveil today a $300 billion program of tax cuts, infrastructure spending and direct aid to state and local governments to spur jobs growth.

BRITAIN’s top share index notched up solid gains yesterday, led by banks and commodities, as investors sought out bargains among battered stocks.

CURRENCIES:

The YEN’s advance to a post-World War II high last month came even after authorities intervened on August 4th in the foreign- exchange market for the first time since March. The stronger yen led to Japan’s machinery orders falling the most in 10 months in July as it makes its products less competitive abroad. SWITZERLAND, which like Japan has had to contend with the appreciation of its currency due to increased demand for save-haven assets, this week pledged to put a ceiling on its exchange rate against the euro.

ENERGY:

OIL traded near the highest close in more than a month in New York on speculation a storm building in the Gulf of Mexico poses a threat to supplies in the US, which were reduced last week by an earlier cyclone.

COMMODITIES:

Corn may gain on speculation that production in the US, the top producer and exporter, will be lower than estimated. Global corn stockpiles are forecast by the USDA to plunge in the 2011-2012 season to the lowest level in five years, as hot weather in the US curbs yields and demand climbs for the grain.

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