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Financial Focus

THE IMF said it is establishing a flexible liquidity line that would act as “insurance against future shocks and as a short-term liquidity window to address the needs of crisis bystanders”. It would be available for six months to countries with relatively good policies that are facing short-term balance of payments needs. Access under the six-month arrangement could be as much as 500 per cent of a member’s quota and come with few conditions.

THE FEDERAL Reserve has discussed how it can improve the communication of its policies to the public, it was revealed last night, stoking rumours that a third phase of the controversial quantitative easing programme (QE3) could be on the way.”A few” of the Fed’s committee believe the economic outlook may be grim enough to warrant more asset-buying, according to the minutes of its November meeting.

THE U.K. TREASURY is preparing to water down a key recommendation in the Vickers report that would protect savers in the event of a bank going bust. Investors and banks have argued that Vickers’ suggestion that retail depositors should be paid back before all other creditors if a bank collapses could risk destroying the market for bank debt and cause corporate deposits to flee the UK. The argument is one the Treasury finds convincing, according to sources familiar with its thinking.

MARKETS:

BRITAINS top shares index hit a seven-week closing low yesterday, led lower by energy stocks on worries slower U.S. growth would crimp demand for crude while Commerzbank’s funding concerns hit Royal Bank of Scotland and Lloyds Banking Group.

SINGAPORE shares fell today in morning trading, dragged by losses in banking stocks, as a downward revision of U.S. GDP data and weak manufacturing survey from China  fuelled concerns over slowing global growth. Singapore lenders were among the hardest hit on the benchmark index, after a planned stress test on banks by the U.S. Federal Reserve added to worries about the health of the global financial system.

CURRENCIES:

THE EURO slid for the sixth time in eight days against the dollar before data that may add to signs that the debt crisis is damping economic growth. The 17-nation euro dropped versus the yen ahead of reports forecast to show that manufacturing in France, Europe’s two biggest economies, fell this month. The pound was 0.2% from a month low against the dollar before the Bank of England releases its November meeting minutes.

ENERGY:

OIL dropped from a three-day high in York as investors speculated that rising gasoline stockpiles in the U.S. and slowing economic growth in Europe will reduce demand for fuel. Futures slipped as much as 1.7% before data today that may show shrinking manufacturing and services in Europe this month and falling U.S. durable-goods orders in October.

COMMODITIES:

Coffee’s biggest slump in three years may be ending as weather damages crops from Colombia to HYPERLINK “http://topics.bloomberg.com/indonesia/”Indonesia, reducing U.S. inventories to the lowest since 2000 just as Kraft Foods Inc. and J.M. Smucker Co. cut prices.  in warehouses monitored by ICE Futures U.S. fell 16% since December, declining for a fourth year, exchange data show.

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