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Financial Focus

Britain will today sue the ECB over new rules that will force the City’s biggest clearing house, LCH Clearnet, to relocate to the Eurozone. The move highlights growing impatience among Whitehall officials and politicians, who believe Brussels is using new regulation as a smokescreen to undermine London’s pre-eminence as a global financial centre.

TWO UNNAMED banks tapped the ECB’s dollar funding facility for the second time yesterday in a fresh sign that Europe’s interbank markets are freezing up. The escalating crisis has seen borrowing costs rise for banks, forcing weaker lenders to tap the emergency cash supply to the tune of $575m.

THE IMF has issued its starkest warning to date that Europe’s banking debacle is turning into a systematic threat to global finance and can no longer be allowed to fester. “This is the most urgent crisis facing the world today,” said Zhu Min, the IMF’s deputy managing director and China’s voice at the institution.

MARKETS:

THE NIKKEI gained 1.7% by lunchtime in Tokyo today, moving away from a fresh 2 and a half year closing low as investors bought back shares after France and Germany said Greece’s place remains in the euro zone. The MSCI Asia Pacific Index added 0.7% at 1:50 pm in Tokyo, after earlier gaining as much as 1.6%. About seven shares rose for every three that declined. The gauge sank 1.7% yesterday to close at its lowest level since August 2010. The S&P 500 index futures slid 0.3%, indicating that the U.S. stocks gauge may halt a three day rally.

EUROPEAN shares are set to advance today, mirroring gains on Wall Street and in Asia following the French and German words of support for Greece. However, traders remain skeptical about the upward movement in European stocks, which are likely to advance for a third straight session after hitting a two year low this week. “Given the fact that we are not seeing much more than rhetoric at the moment, many people are still expecting Greece to default and see the move up as nothing more than a relief rally,” said Zahid Mahmood, trader at Capital Spreads.

CURRENCIES:

THE EURO may win the “ugly contest” and drop against the dollar, as Europe’s debt crisis makes the region more likely to fall into an economic recession than the U.S., according to Westpac Banking Corp.

ENERGY:

OIL dropped for a second day in New York as investors bet that increasing U.S. fuel stockpiles and signs of a weakening economy will indicate demand will falter. Futures declined as much as 0.7% after an Energy Department report yesterday showed gasoline supplies rose 1.94 million barrels last week, the biggest increase since June.

COMMODITIES:

CORN retreated on signs that demand from producers of ethanol is declining and on concern that livestock feeds may seek cheaper substitutes. Wheat fell. December delivery corn lost 0.8% on the Chicago Board of Trade at 9:48am Singapore time. The grain climbed 45% in the past year, beating a 3.5% decline in wheat.

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