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Financial Focus

Divisions emerged at the G20 summit in Mexico last night over plans for Europe’s bailout funds to snap up the debt of member states such as Italy
and Spain. European officials briefed that a consensus had been reached
on the need to cut borrowing costs of troubled Eurozone governments,
leading to reports that even German Chancellor Angela Merkel had shifted
her stance.

HIGH taxes, expensive workers and a lack of decent office space is driving
foreign investors away from the UK and into Germany, according to a
damning new report published today. Unless major changes are made, the
UK will lose its place as Europe’s top destination for foreign direct
investment (FDI) to Germany within the next two years, Ernst & Young
warns.

LEADING hedge fund managers are betting on a significant sell-off in
German government bonds in the coming months after a sharp fall in yields
on the debt paper driven by a flight to safety in the Eurozone.

BRUSSELS will water down moves to force firms to rotate which credit
rating agencies they use to evaluate their debt, it emerged yesterday. Yet
the European parliament also voted in favour of new restraints on the ability
of rating agencies to downgrade its member governments.

SPAIN lurched closer to becoming the largest euro zone country yet to be shut out of credit markets when it had to pay a euro era record price to sell short-term debt yesterday. The soaring borrowing costs showed that a Eurozone deal to lend Spain up to 100 billion euros for its banks had not solved the country’s problems or restored investor confidence and suggests more aid may be needed fix its finances.

MARKETS:
ASIAN shares rose on growing hopes that central banks around the world would announce measures to boost faltering global growth Sentiment improved after G20 leaders pledged to support economic growth and help overcome Europe’s debt crisis.

JAPANESE stocks rose, with the Topix Index reaching a month high, as the country’s imports and exports exceeded estimates, signalling stronger demand, and as investors speculated central banks globally may do more to boost economic growth.

SIGNS of slowing growth amid Europe’s debt crisis could mean the U.S. Federal Reserve, which began a two-day meeting yesterday, will extend its so-called Operation Twist, according to JPMorgan Chase & Co., Jefferies & Co. The program involves selling short-term debt and buying longer-term bonds.

CURRENCIES:
THE EURO fell, snapping yesterday’s gain, before Spain auctions bonds tomorrow with European leaders struggling to contain the region’s debt crisis. Demand for the dollar was limited amid speculation the Federal Reserve will decide on further monetary stimulus when it concludes a two-day meeting today.

ENERGY:
OIL traded near the highest close in two days as rising imports by Japan and speculation the Federal Reserve will add stimulus to the U.S. economy countered concern that Europe’s debt crisis will derail the global recovery.

COMMODITIES:
INVESTORS from JPMorgan Chase & Co. to BlackRock Inc. are trying to make money from the exploding popularity of iPads and increasing sales of hybrid cars by investing in producers of lithium for batteries. Prices for the conductive metal, the lightest in the periodic table, have tripled since 2000 in a market now worth $1 billion a year as uses expand in vehicles, ceramics, electronics and lubricants.

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