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Financial Focus

GLOBAL markets were shaken yesterday as fears returned that governments will not manage to save the Eurozone. The honeymoon period that followed last week’s euro deal proved all too brief, making way yesterday afternoon for a show of bitter disappointment from traders. Stocks fell sharply, peripheral Eurozone economies saw their bond yields soar towards the “danger zone” again, and the euro dropped as investors fled risky assets once more.

THE UK must vigorously oppose Europe’s stance on new capital rules in the wake of RBS’s collapse, FSA chairman Lord Adair Turner said yesterday. The long-awaited report into the bank’s 2008 bail-out by taxpayers published yesterday said that regulators were using a “fundamentally flawed” set of rules for how much a bank must put aside in reserves. As part of its response to the collapse of RBS under the leadership of Sir Fred Goodwin, the FSA wants the UK to introduce its own, hyper-strict capital regime. However, Europe wants all states to have the same capital rules, one of the major flashpoints leading to David Cameron’s veto of the EU treaty on Friday, as he told parliament yesterday.

MARKETS:

THE FTSE 100 fell in light volume yesterday, with investors selling riskier banking and mining assets as analysts concluded the lack of detail in a European deal on fiscal union left question marks over its long-term plausibility. London’s blue-chips fell 101.35 points, or 1.8%, to 5,427.86, erasing Friday’s 0.8% rise, as analysts said there was far more work for European leaders to do before Europe’s debt crisis could be solved. Across the Atlantic, Wall Street indexes were lower as the U.S. joined the post-summit sell-off, and as reports said fourth-quarter results would miss its forecast. The demand for stocks offering shelter from the economic storm was the main reason the UK’s benchmark index did not register a steeper fall.

CURRENCIES:

THE DOLLAR reached a two-month high against the euro before three European nations and the region’s bailout fund sell bills amid speculation Standard & Poor’s may cut sovereign credit ratings in the common currency area. The yen touched a two-week high against the euro before a German report today that may show investor confidence in Europe’s largest economy slid to a three- year low. India’s rupee weakened to a record low after manufacturing contracted for the first time since June 2009.

ENERGY:

CHINA PETROLEUM & Chemical Corp., known as Sinopec, and Energy Holdings Ltd. offered $2 billion cash for China Gas Holdings Ltd. to gain control of a fuel distribution network covering 20 provinces. ENN and China Petroleum, Asia’s biggest refiner, bid HK$3.50 a share for the Hong Kong-based company that supplies piped gas to the mainland, the companies said today in a statement. Buying China Gas will give the companies access to its 6.6 million residential customers and 41,981 industrial and commercial users in the world’s second-biggest economy.

COMMODITIES:

THE GLOBAL GLUT in lead is falling to a five-year low as China, the biggest buyer, consumes a record amount to make batteries for everything from cars to emergency lighting to electric bicycles. The supply surplus will drop to 8,000 metric tons in 2012 from 78,000 tons this year as China, which accounts for about 44% of global demand, uses 9.5% more, Morgan Stanley estimates. Prices may rise as much as 19% to $2,500 a ton next year, according to the median estimate of 18 producers.

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