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Financial Focus

SIXTEEN Spanish banks and four of the country’s regions were
downgraded by ratings agency Moody’s last night as the sovereign debt
crisis spread from Greece to the Eurozone’s larger troubled economies.

GREEK voters are returning to the establishment parties that negotiated its
bailout, a poll showed on Thursday, offering potential salvation for
European leaders who say a snap Greek election next month will decide
whether it must quit the euro.

GREECE’s credit rating was downgraded one level by Fitch Ratings on
concerns the country won’t be able to muster the political support needed
to sustain its membership in the euro area as leaders began campaigning
ahead of the second national vote in six weeks.

PRIME Minister David Cameron said yesterday that there is scope for
even more monetary stimulus from the Bank of England, putting him at
odds with Paul Fisher, a senior Bank official, who said this should only be
considered if the economy takes a serious downturn, which is a scenario
he does not envisage occurring.

RATINGS agency Fitch yesterday said the world’s top banks may need to
raise a total of $556bn to meet new capital rules, cutting returns by 20%
and forcing them to curb investor payouts and raise customer charges.
DE LA RUE, the British company that produces banknotes for more than
150 countries has asked staff to select potential security threads for use in
new banknotes so that it is ready should Greece exit the euro.

FRANCE’s new left-wing government started work on Thursday with pledges to combat excessive austerity but better
manage public finances, marking the debut with a 30% pay cut for the President and all ministers.

Markets:
OVERNIGHT, Japan’s Nikkei share average dropped sharply with securities hammered by fears of contagion from
Spain’s ailing bank system and a strong yen pushed down exporters.
TODAY, European shares are set to open sharply lower, heading for their worst weekly loss since late November on an
escalating crisis hitting Spain’s sovereign debt and its banks, downgraded en masse by Moody’s overnight.

Currencies:
THE EURO touched a four-month low, extending declines to a third-straight week, amid concern Europe’s sovereign-debt
crisis is worsening. The 17-nation currency was 0.2% from a three-month low versus the yen after Fitch Ratings
downgraded Greece’s long- term credit rating to CCC from B-, citing heightened risk that the nation may not be able to
sustain membership in the monetary union.

Energy:
OIL may decline next week on signs of a slower economic recovery in the US, as consumer confidence fell last week to
the lowest level in almost four months and more people than forecast filed claims for unemployment benefits.

Commodities:
GOLD rose slightly yesterday, as buyers were enticed to the market because of its relatively low price. However, the
2.51% rise to $1575.20 still leaves gold well below its recent $1795 peak in March as investors steer clear of the
traditional safe haven despite renewed Eurozone worries hitting other assets like stocks and bonds. Analysts believe the
unusual falls in gold prices have been caused by central banks ending quantitative easing, thus reducing inflationary
pressures which eat away at the value of assets like bonds.

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