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Financial Focus

 

A CHINESE purchasing managers’ index signalled manufacturing may contract for a third month as a slowing economy boosts the case for the government to further loosen credit controls.

International Monetary Fund Managing Director Christine Lagarde joined global officials today in warning that the world economy is decelerating and faces “significant and urgent challenges.”

China has allowed its five biggest banks to boost first-quarter lending and may relax capital requirements.

THE IMF’s Christine Lagarde joined world financial and trade organization chiefs in warning policy makers gathering in Davos, Switzerland, next week against fiscal cuts that jeopardize growth. Governments need to stem contagion in Europe and restore confidence in financial institutions to end the sovereign-debt crisis and spur growth, members of the Global Issues Group of the World Economic Forum said. Policy makers should manage fiscal consolidation to promote rather than reduce prospects for growth and employment, the Global Issues Group said.

GREECE and its private bondholders inched closer yesterday to a vital debt swap deal needed to avoid a messy default by Athens, with both sides saying progress has been made and negotiations would continue today.

Nearly a week after talks hit an impasse over the coupon, or interest  payment, that Greece must offer on its new bonds under the swap, there were signs the two sides were moving to overcome their differences as time to strike a deal runs out quickly.

MARKETS:

EUROPEAN shares advanced for a fourth straight session yesterday as strong auctions of euro zone debt and encouraging results from top U.S. banks triggered a high-volume rally led by battered financial stocks. Euro zone banks, which had fallen 38% last year on fears over their holdings of sovereign debt, rallied 7.4% after healthy demand for French and Spanish bonds, a sign of confidence in regional governments’ ability to refinance their debt.

JAPAN’S Nikkei average rallied this morning to its highest level in more than two months boosted by encouraging U.S. banks results, while investors’ near-term concerns over Europe eased after successful debt auctions in Spain and France. The Nikkei advanced 1.5% to 8,766.36 for the fourth straight session and gained 3.1% for the week, while the broader Topix advanced 2%.

CURRENCIES:

THE DOLLAR AND YEN headed for weekly losses against most major peers amid U.S. data pointing to recovery in the world’s biggest economy, reducing demand for refuge assets. The greenback touched a two-week low versus Europe’s currency before a report forecast to show sales of existing U.S. homes rose to the highest in one and half years years. The 17-nation euro strengthened yesterday as Spain and France sold bonds at lower yields in their first sales of medium and long-term debt since being downgraded by Standard & Poor’s.

ENERGY:

OIL rose in New York amid speculation the global economy will recover and boost fuel demand, while tension with Iran threatens to curb supplies. Oil for February delivery rose 29 cents, or 0.3%, to $100.68 in electronic trading on the New York Mercantile Exchange at 3:57 p.m. Sydney time. The contract expires today. The more-active March contract advanced 34 cents to $100.88 a barrel. Prices are 2% higher this week.

COMMODITIES:

COPPER traders are the least bearish in a month after the commodity had its best start to a year since 2009 and stockpiles tracked by the world’s biggest metals exchange were poised to slump to the lowest in three and a half years. Prices reached a four-month high of $8,410 a metric ton yesterday, taking this year’s advance to 11%. Inventories tracked by the London Metal Exchange are already the smallest since December 2010 and existing orders to withdraw metal may reduce that to the lowest since July 2009.

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