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Financial Focus

THE GREEK government is racing to complete a lengthy checklist of reforms demanded by international lenders before the end of February to unlock a €130bn bail-out agreed in the early hours of yesterday morning after months of high-stakes bargaining.

The tough conditions and the short timetable reflect the collapse of trust between Greece and its trio of lenders – the European Commission, the European CentralBank and the International Monetary Fund – after Athens failed to live up to the terms of a previous €110bn bail-out agreed nearly two years ago.

CHINA’S MANUFACTURING may shrink for a fourth month in February, indicating the world’s second- biggest economy remains
vulnerable to a deeper slowdown as Europe’s crisis caps exports and the housing market cools. China is cutting banks’ reserve requirements from February the 24th to support an economic expansion that Nomura Holdings Inc. estimates may be 7.5% this quarter, the least since the global financial crisis. In today’s report, a measure of export orders fell, underscoring Commerce Minister Chen Deming’s caution that the government is not optimistic about the outlook for trade after a decline in shipments in January.

GERMANY AND FRANCE moved even closer to full fiscal union by announcing they will be “harmonising” their corporate tax rates by 2013 – a move that will increase the prospect of an EU-wide enforced tax rate that Ireland and the UK have been opposed to.

MARKETS:
US MARKETS ignored the shakiness of the Greek bailout deal yesterday, with bullish investors pushing the Dow Jones
through the symbolically important 13,000 mark for the first time since before the financial crisis. The Dow Jones ended
the day up 0.12% at 12,965.69 – having earlier passed 13,000 for the first time since May 2008. Investors remain
optimistic about the country’s growth and employment prospects, boosted in part by steady support from the Federal
Reserve’s quantitative easing.
EUROPEAN STOCKS dropped as economists criticised the Greek deal, arguing it was based on “ludicrous” economic
growth forecasts and that another bailout would be needed soon for it to stay in the Eurozone. Germany’s DAX fell
0.58%, the French CAC dropped 0.21% and the Euro Stoxx50 fell 0.34%. Portuguese government bonds took a hit as
investors worried the country would be next to come under pressure, with 10-year yields rising 17.8 basis points to
12.43%.
CURRENCIES:
THE DOLLAR rose to a six-month high of 80.01 yen on speculation signs the U.S. economy is accelerating will reduce
the case for more quantitative easing from the Federal Reserve. The U.S. currency gained for a fifth day versus the yen
before data economists forecast will show the housing market is stabilizing.
ENERGY:
OIL FELL on speculation that prices near a nine-month high will curb demand as the global economy slows and crude
stockpiles rise in the U.S., the world’s biggest consumer of the commodity. Futures slid as much as 0.5%, heading for the
first decline in more than a week, as crude’s relative strength index signalled prices may have risen too quickly.
COMMODITIES:
MINING COMPANIES and refineries are producing more nickel than at any time in history, expanding a glut that
threatens to reverse this year’s rally. Production will exceed demand by 45,000 metric tons, a 73% jump from 2011,
Barclays Capital estimates. That’s equal to 46% of stockpiles tracked by the London Metal Exchange.

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