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Financial Focus

SENATORS in Washington last night voted through a bill that would allow the U.S. to punish China for undervaluing its currency, amid fears of a trade war. The bill was designed to encourage China to let its currency rise by giving the U.S. the power to charge tariffs on goods from countries that have subsidized their exports via the currency market.

THE EUROZONE’S grand plan to boost the firepower of the bailout fund was dealt a blow last night as the Slovakian government voted “no”. Legislators now face a scramble to form a new coalition and pass the bill, which could happen tonight at the earliest.

EUROPEAN governments should focus on getting their houses in order and should not force blanket recapitalization on the region’s banks, according to the head of the BBA, the industry body. BBA Chief Angela Knight said, “You’ve got to solve the problem in sovereign countries in the first place. We’re not talking about a banking crisis; it’s a sovereign debt problem.”

MARKETS:

THE FTSE 100 snapped a four day winning streak yesterday, as worries over Europe’s debt problems prompted investors to bank some of the gains made in commodity and financial stocks. The index closed down 3.3 points, but recovered from a session low, as a robust opening on Wall Street ahead of the start of the third quarter reporting season calmed investor nerves.

THE HANG SENG erased losses and moved into positive territory this morning helped by Chinese financials tracking strength in the mainland markets. The index gained 0.3% as of 0314 GMT while the Shanghai Composite index was up 1.5%.

CURRENCIES:

THE DOLLAR and yen rose against most major counterparts as concern that the trade friction between the U.S. and China will escalate and Europe’s debt crisis will dent growth and support demand for the safest assets. The euro declined before a report on industrial production that may indicate a slowdown in Europe. STERLING maintained yesterday’s loss versus the dollar before data forecast to show UK unemployment claims increased for a seventh month.

ENERGY:

OIL fell for the first day in six, snapping the longest run of gains this year, after U.S. and European lawmakers rejected economic relief plans and OPEC lowered its crude demand forecast. Crude for November delivery dropped as much as $1.29 a barrel. Prices are down 7.2% this year.

COMMODITIES:

CORN increased, extending that largest advance in 16 months, on signs last month’s 23% slump may have attracted buyers seeking to rebuild stockpiles. December delivery corn added as much as 1.2% a bushel on the Chicago board of trade after jumping 6.6% yesterday, the biggest closing gain for a most-active contract since June the 30th 2010.

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