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Financial Focus

TUESDAY’S HEADLINES:
• Credit agency warns of mass downgrade in Europe
• German and French leaders agree to new rules ahead of summit
• UK retailers suffer biggest fall since May
• Asian markets and US futures fall overnight – Europe set to follow
• Yen rises on Europe’s downgrade warning
• Oil drops on demand worries – Libya set to restore output
• Gold drops overnight following biggest daily loss in two weeks

NEWS:
S&P WARNED yesterday that Germany, France and four other
nations may lose their AAA credit ratings depending on the result
of a summit of European Union leaders on Friday. The other
countries warned about a downgrade are Estonia, Ireland, Italy,
Malta, Portugal, Slovakia, Slovenia and Spain. The company said
it maintained the negative outlook for Cyprus, and Greece wasn’t
put on “credit watch.”

GERMAN Chancellor Angela Merkel and French President Nicolas
Sarkozy strengthened their push for new rules to tighten euro area
economic cooperation at their pre-summit meeting yesterday. The
leaders of Europe’s two biggest economies responded in a joint
statement late yesterday that they “took note” of the move by S&P,
while both countries “reinforce their conviction” that common
proposals for closer fiscal union in the European Union will
“strengthen coordination of budget and economic policy,” and
promote stability and growth.

UK RETAILERS last month suffered their biggest annual fall in
like-for-like sales since May, as widespread discounts failed to lure
in pre-Christmas shoppers, the British Retail Consortium said
today.

MARKETS:
US stocks gained yesterday, but the rally was dampened by news that Germany and other top-rated European
nations could see their credit ratings cut.

ASIAN stocks fell for the first time in seven days after S&P’s warning it might downgrade a total of 15 Eurozone
countries if European leaders fail to produce a credible plan to solve the region’s debt crisis. S&P 500 futures
expiring in December fell, signalling the US equity benchmark may pare yesterday’s 1% gain when the stateside
markets open later.

EUROPE’s main indexes are expected to fall today, halting a sharp ten day rally after S&P warned it may
downgrade 15 euro zone countries if EU leaders fail to agree on a comprehensive plan to resolve the region’s debt
crisis at a summit on Friday.

CURRENCIES:
THE YEN rose against its major counterparts as S&P put 15 European nations on watch for potential downgrades,
boosting demand for the currency as a refuge. EUROPE’s richest investors are moving money out of euros amid
fears the single currency may not survive a sovereign debt crisis, with US dollars and yen among the favoured
destinations, bankers say.

ENERGY:
OIL dropped from the highest in almost three weeks in New York as investors speculated that fuel demand would
falter amid signs Europe is struggling to tame its sovereign debt crisis. LIBYA, which has Africa’s largest proven oil
reserves, will restore output to pre-conflict levels by the second half of next year, according to Abdalla El-Badri,
secretary- general of OPEC.

COMMODITIES:
GOLD slumped overnight, following the precious metal’s biggest daily loss in two weeks in the previous session on
fears of a possible credit rating downgrade for Eurozone nations.
DATA AT 0700 BST (FT.COM)
Index Value Change
FTSE 100 5,568 +0.28%
S&P 500 1,257 +1.03%
Eurofirst 300 993.27 +0.80%
Nikkei 225 8,575 -1.39%
Shanghai Comp 2,328 -0.23%
Hang Seng 18,929 -1.31%
Dow 12,098 +0.65%

Commodities Value Change
WTI Crude $100.76 -0.23%
Brent Crude $109.57 -0.22%
Gold $1,711 -1.12%
Copper $3.55 -1.53%
Corn $5.79 -0.30%

Forex Pair Value Change
$ per € 1.3374 -0.11%
$ per £ 1.5626 -0.07%
¥ per $ 77.72 -0.05%
¥ per € 103.94 -0.16%
€ per £ 1.1679 +0.03%

Prediction Opening  Change
FTSE 100 -57 points -1.0%
German DAX -68 points -1.1%
French CAC-40 -30 points -0.9%

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