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Financial Focus

BORROWING costs for the UK government fell below those of Germany for the first time in recent history yesterday, following Germany’s failure to sell all of its 10-year bonds in an auction on Wednesday. Low yields indicate a lower level of risk in lending to a country. Yields on Britain’s 10-year gilts fell to 2.16 per cent yesterday, but German bund yields rose to 2.194 per cent – a spread of 3.4 basis points.

THE CHINESE government has launched a crackdown on hundreds of unregulated electronic equity and futures exchanges that have sprung up in recent years to trade everything from fine art and commodities to insurance products. The country’s State Council published a notice announcing a campaign to “clean up and consolidate” the many exchanges.

LEGAL changes may be on the way to force overspending nations back into line, after crisis talks between German Chancellor Angela Merkel, French President Nicolas Sarkozy and new Italian Prime Minister Mario Monti yesterday. The three want to change European treaties to make sure states only run small deficits in future. “Each country has its budget but it is about the ones who do not respect the Stability Pact and can in future be called to account,” said former EU Commissioner Monti.

MARKETS:

THE FTSE ended lower for the ninth consecutive session yesterday, marking its worst run since January 2003. With Wall Street shut for Thanksgiving, trading volumes on the FTSE 100 were light at 88% of their 90-day average, encouraging intra-day profit taking and causing sharp moves on the index, traders said. The FTSE 100 closed 0.24% lower at 5,144 points, having risen to a day high of 5,184 in morning trade, boosted by better-than-expected macro data from Germany, before falling to a trough of 5,098 in the afternoon.

THE NIKKEI 225 average eked out a gain but remained on track for a losing week this morning as statements by German and French officials failed to convince investors that leaders were closer to a consensus on how to contain the euro zone debt crisis.

CURRENCIES:

THE POUND fell to a seven-week low against the dollar yesterday after German Chancellor, Merkel said joint euro bonds would send a “wrong signal,” spurring demand for the relative safety of the U.S. currency. Sterling declined versus 12 of its 16 major counterparts, losing the most versus the South African rand and Australian dollar.

ENERGY:

OIL headed for a second weekly loss in New York as speculation debt crisis threatens its economy countered concern that violence in Saudi Arabia may destabilize the world’s biggest crude exporter. Futures are poised for a 0.9% slide after Portugal and Hungary’s sovereign grade ratings were cut and Germany uled out joint euro-area borrowing.

COMMODITIES:

GOLD traders are more bullish after investors accumulated the biggest-ever hoard of the metal, with Europe’s  debt crisis driving them to protect their wealth with this year’s second-best performing commodity. Eighteen of 26 surveyed by Bloomberg expect bullion to rise next week.

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