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Financial Focus

NEWS:
EUROPEAN banks borrowed enough cash from the ECB at its first
three-year offering to refinance almost two-thirds of the debt they
have maturing next year amid concern that markets will remain
frozen. By flooding the banking system with cheap money, policy
makers are attempting to stave off a looming credit crunch by
encouraging banks to maintain lending. The ECB will hold a
second auction of unlimited three-year cash in February, allowing
banks to pre-fund themselves for all of next year and beyond, say
analysts.

THE US’s AAA rating will probably be cut by Fitch Ratings by the
end of 2013 unless lawmakers are able to formulate a plan to
reduce the budget deficit after next year’s congressional and
presidential elections, a company statement said yesterday.

UK RETAIL insolvencies may reach the highest level in four years
as weak Christmas sales leave chains struggling to meet rent
payments due this month, according to a leading restructuring firm.
A disappointing Christmas season may be the nail in the coffin for
retailers who have been barely hanging on for years.

After strong US housing starts data on Tuesday, sales of pre-
owned homes surged in November, although revisions to data for the last four years showed the recession in the
housing market was deeper than previously thought.

MARKETS:
OVERNIGHT, Asian stocks retreated from a one-week high, as the ECB’s efforts to increase lending underscored
the difficulties facing Eurozone banks. Asian stocks are heading for the biggest yearly loss since 2008 as Europe’s
crisis weighed on global economic growth and liquidity.

TODAY, expect Europe’s main stock indexes to edge higher, but the rebound could be limited as the European
Central Bank’s loans to banks failed to ease fears over region’s debt crisis.

CURRENCIES:
THE DOLLAR traded near an 11-month high against the euro after European banks borrowed a record 489 billion
euros from the ECB yesterday. The US currency also strengthened before reports that may show confidence and
spending among US consumers gained. A PANEL from the Swiss government and the central bank is examining
options such as capital controls and negative interest rates to curb the franc’s strength, Finance Minister Eveline
Widmer-Schlumpf said.

ENERGY:
OIL traded near the highest in more than a week as the biggest drop in US crude inventories in a decade
countered concern that Europe’s debt crisis will worsen. Oil is up 25% this quarter, the biggest gain since the
second quarter of 2009, as the EU and the US seek support from the Middle East and Asia for sanctions against
Iran, the second-biggest producer in the OPEC.

COMMODITIES:
GOLD declined as stronger-than-forecast demand for ECB loans raised concern that the region’s debt crisis
remains uncontained, boosting the dollar and damping demand for alternative assets. Spot silver fell for a second
day, losing as much as 1.1%, making it 5.6% lower for the year.

THURSDAY’S HEADLINES:
• European banks keen to borrow in ECB first loan offering
• Fitch will probably cut US AAA rating at end of 2013
• UK retail insolvencies may reach highest levels in four years
• Sales of US pre-owned property up in November
• Asian markets in retreat, but European stocks may edge higher
• Dollar strengthens on Europe worries and stronger US spending
• Swiss considering ways to curb franc’s strength
• Oil continues its rise as inventories drop and Europe worries
• Gold declines as ECB loan take-up raises further concerns

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