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Today's Financial Focus

European Central Bank policymakers said on Monday that officials were working to increase the firepower of the region’s rescue fund in their latest effort to staunch a crisis that US President Barack Obama said was “scaring the world.” Investors reacted positively to ECB statement, but some market analysts cautioned against undue optimism until more tangible action is taken.

A deal reached late on Monday between top Democrats and Republicans in the US Senate to keep federal operations running until November 18th. It was approved by an overwhelming 79 to 12 votes. The measure was designed to be approved in the upper chamber and then put pressure on the House of Representatives to pass similar legislation, one congressional aide said.

CREDIT rating agency, Standard & Poor’s, could be hit with legal action from the Securities & Exchange Commission for misrating a risky package of sub-prime mortgage bonds in 2007. The SEC is considering action against S&P for violating securities laws in its positive rating of a CDO in August 2007. By January of 2008 the CDO was in technical default, and by the end of the year all of its AAA bonds were classed as junk.

MARKETS:

Bets on declining China share prices “have been building up over the past six months as hedge funds went short financials,” Todd Martin and Anthony Lee, analysts at Societe Generale, wrote in a report dated today. China is “the world’s most crowded short,” they wrote. Stocks may rebound as the Shanghai Composite Index is near the “technically important” low of 2,319 reached in July 2010. Shares may also rally as the level of shorts as a percentage of total volume has climbed to 9%, while hedge funds have been restricted from shorting stocks in much of Europe, the analysts wrote.

ASIAN stocks rebounded from a 16-month low, following two days of gains in the US. S&P futures also rose overnight, giving hope that the US markets will continue to make gains when they open.

EUROPEAN shares are expected to surge today, adding to the previous session’s rally on rising expectation of fresh euro zone measures to contain Greece’s debt crisis.

CURRENCIES:

The EURO gained for a third day against the dollar and traded at ¥103.41 from ¥103.34 yesterday, when it touched ¥101.94, the weakest level since June 2001. Despite its gains on Monday, sterling remained vulnerable to selling versus the dollar on concerns a fragile UK economy could prompt the Bank of England to resort to more monetary easing.

ENERGY:

OIL rose for a second day in New York on speculation European governments will tame their sovereign-debt crisis, tempering a slowdown in the region’s economy and demand for raw materials.

COMMODITIES:

Copper for three-month delivery rose 1% on the London Metal Exchange. The metal dropped 17% in the previous seven days. Zinc climbed 1.4%, also advancing for the first time in eight days, while nickel increased 2.8%. Cash gold advanced 1.2%, halting a four-day losing streak.

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