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Financial Focus

FRENCH authorities were warned yesterday that the country’s credit outlook could be hit by a sustained rise in its debt yields and lingering sluggish growth. Yields on 10-year French government debt spiked as news of Moody’s analysis spooked markets, reaching over 3.6% in early trading. But yields subsided during the day, after analysts noticed that the warning concerned “the stable outlook, though not at this stage the level” of France’s gold-plated credit rating.

PRESIDENT Barack Obama blamed political bickering for a congressional super committee’s failure to reach a deal to cut the federal deficit. But he vowed to see through the automatic budget cuts that kick in by 2013 as a result of the failure to meet yesterday’s deadline. Seeking to reassure the markets, Obama said the US did not face an imminent threat of default as it did in August and “one way or another” the government would trim at least $2.2 trillion from the deficit in a decade.

THE UK is sinking even further into debt according to new research by consultancy firm McKinsey. McKinsey had said that a “painful” period of deleveraging could last for six or seven years following the financial crisis, cutting the debt to GDP ratio by 25%. Yet an updated report is expected to show that combined debt levels, in both the government and private sectors, have almost reached five times the UK’s GDP.

MARKETS:

THE UK’S FTSE 100 slid to its lowest close in six weeks yesterday, with worries mounting over the health of the global economy as the U.S. and Europe wrestled with their respective debt problems. London’s blue chip index fell 140.34 points, or 2.6% to 5,222.60, its sixth straight day of losses and adding to the previous week’s drop of 3.3%, with analysts warning of potential for further downside.

THE  Nikkei Stock Average clawed back ground after tumbling to an 8-month intraday low today as investors sold risk assets on a lack of progress in U.S. and European debt problems, though a two-and-a-half-year low set in March was seen holding for now. Volume was thin ahead of a  holiday on Wednesday, with investors reluctant to push prices down too far and some shares paring losses from lows hit shortly after the open.

CURRENCIES:

THE YEN weakened against most major counterparts after ratings companies affirmed the U.S. credit grades, sapping demand for  currency as a haven. THE EURO was within 0.4% of the weakest level in a month before data that may show European consumer confidence sank to a two-year low.

ENERGY:

OIL traded near the lowest price in more than a week in New York as investors speculated that stockpiles are rising in the U.S. and European demand will fall. Futures swung between gains and losses after dropping yesterday for a third day. A U.S. Energy Department report tomorrow may show oil and fuel supplies increased last week.

COMMODITIES:

SOYBEANS may extend their advance from a 13-month low on forecasts that rains are likely to delay planting in  the world’s second and third largest growers after the U.S. Soybeans for delivery in January advanced as much as 0.6% to $11.55 a bushel on the Chicago Board of Trade and were at $11.485 at 11:03 a.m. in Singapore. Futures dropped yesterday to $11.45, the lowest price since October the 8th 2010.

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