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Financial Focus

THE WORLD is still waiting for a solution to the Eurozone crisis following last week’s make-or-break summit, IMF chief economic Olivier Blanchard said yesterday. While he said there has been “progress”, Blanchard added: “What happened last week is important: it’s part of the solution, but it’s not the solution.” “A lot of the volatility is coming from statements from Europe, showing the range of opinions and inability to get to a logical decision process,” he added. 

THE BANK of England overestimated the impact of its initial quantitative easing programmes; it emerged this morning, while the latest round of asset purchases could be less effective than previously thought. A study by the Bank of International Settlements (BIS) reveals that the policy caused yields on government debt to fall by only a fraction of the amount estimated by the Bank in September – shortly before it engaged in an extension of the scheme, dubbed QE2. The report also warns that future rounds of asset purchases could have a lesser impact than their predecessors.

MARKETS: THE FTSE 100 rose on Friday as investors took the positives out of agreements at the European summit. Talk of potential Chinese investment in Europe and improving economic data in the U.S. also lifted sentiment. While not the emphatic solution to the euro zone’s two-year old debt crisis some had hoped for, EU countries came to a deal on budget rules and other measures to help to restore confidence and move toward resolving the debt crisis.

THE SHANGHAI COMPOSITE INDEX slipped to the lowest level since April 2009 in thin trading this morning, with mainland investors jittery over a possible policy response from Beijing after data last week pointed to a serious risk of a sharp industrial slowdown. Midday turnover in Shanghai stayed near a three-year low and is expected to stay low ahead of the central government’s annual economic meeting. 

CURRENCIES:

THE DOLLAR gained against most of its 16 major counterparts before a German report tomorrow that may show investor confidence in Europe’s largest economy slid to a three-year low, boosting demand for safer assets. The euro slid versus the yen as Italy and France prepare to sell bills amid concern the region’s debt crisis is spreading to bigger nations.

ENERGY: OIL SWUNG between gains and losses as concern that Europe will be unable to tame its debt crisis countered Iran’s calls for production cuts before an OPEC meeting this week. Futures were little changed after falling 1.5% last week. German Finance Minister Wolfgang Schaeuble said euro-area policy makers will focus on implementing an accord to strengthen budget rules as quickly as possible.

COMMODITIES: WHEAT AND SOYBEANS fell to the lowest in more than a year and corn declined on Friday, after the U.S. government said global crop inventories will be larger than expected. World wheat stockpiles before the 2012 harvest will total 208.52 million metric tons, 2.9% more than projected a month earlier and the highest since 2000, the U.S. Department of Agriculture said. Global soybean reserves will be 1.5% bigger than last month’s estimate and U.S. stockpiles will rise to a five-year high. World Corn supplies will be 4.6% higher. The outlook for the crops topped analysts’ forecasts.

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