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Financial Focus

CONFIDENCE in France’s and Spain’s ability to pay back their debts weakened yesterday as investors piled into UK and German government debt. Yields on 10 year French bonds rose 0.3% over the day, to 3.47%. Spain’s yields have risen steadily as well, hitting 5.95% for 10 year bonds. It now costs almost twice as much for the French to borrow as the Germans.

UK BANKS have pitched a credit easing scheme that would flood small businesses with up to £4bn of new loans within a year of being launched. Britain’s biggest lenders have proposed a plan that would see the government provide up to £800m to cut the cost of borrowing for small to medium sized businesses (SMEs).

VINCE CABLE warned yesterday that the UK is in ‘dangerous territory’ as it faces a potential meltdown across the Eurozone, but said the government had plans to handle a possible breakup of the currency union. The business secretary said that the UK was well positioned to avoid the kind of crisis engulfing states such as Italy.

MARKETS:

ASIAN SHARES staged a modest rebound on rising hopes that Europe’s debt crisis will be contained. The MSCI Asia Pacific index rose 0.3% as investors took heart from Italy’s successful bond auction and Greece’s appointment of a new prime minister. Hong Kong’s Hang Seng gained 0.8% while China’s Shanghai Composite index added 0.5%. Banks and commodity producers gained ground as Europe’s debt crisis showed some signs of stabilizing.

IN OVERNIGHT TRADING, global risk assets saw tepid gains. European stocks suffered early sharp falls but then rallied after an auction of Italian T-bills saw strong demand, albeit at high yields, as Rome’s benchmark yield fell back below 7%. The S&P 500 picked up steam after a soft opening and its worst decline in three months on Wednesday, when it fell 3.7%. By the close yesterday it was up 0.9% despite a downgrade of Apple leading to a 2.6% decline.

CURRENCIES:

THE YEN rose to its strongest position against the dollar as concern Europe’s spreading debt crisis will dent global growth.

ENERGY:

Oil rose in New York, headingfor the longest run of weekly gains since April 2009, on speculation that signs of U.S. economic growth and Europe’s steps to contain its debt crisis will support demand for fuel. Crude climbed as much as 0.5% and is poised for a sixth weekly increase.

COMMODITIES:

GOLD TRADERS and analysts are the most bullish in seven years as investors accumulate metal at the fastest pace since August to protect their wealth from a widening European debt crisis. Gold exceeded $1,800 an ounce for the first time in seven weeks on November the 8th and hedge funds are holding their biggest bet on higher prices since mid-September.

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