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Financial Focus

GERMANY retained a stable outlook for its top credit rating at Standard &
Poor’s just over a week after Moody’s Investors Service warned that the
nation’s AAA grade was at risk.

THE US FEDERAL Reserve moved a step closer to adding stimulus into
an economy plagued by weakening growth and a jobless rate that has
stayed at 8% or higher for more than three years. Central bankers
concluded their two-day meeting yesterday saying they “will provide
additional accommodation as needed” to bolster the expansion.

THE UK’S recession looks set to deepen even further after manufacturing
output fell in July at its fastest rate for more than three years, according to
a Markit’s PMI survey published yesterday.

US MANUFACTURING unexpectedly contracted in July for a second
month, reflecting a drop in orders that threatens to undercut a mainstay of
the recovery.

GREECE yesterday agreed €11.5bn of additional spending cuts to meet
the terms of its bailout. The additional salary, pension and benefit cuts are
certain to upset the Greek public who have put up with years of austerity.
ITALY’s Mario Monti says the Eurozone bailout fund will be given a
banking licence to help deal with the currency union’s debt crisis.

ANALYSTS expect that the Bank of England will also adopt a “wait and
see” approach when it decides on monetary policy today.

FOR THE first time in more than two years, commodities, equities, bonds and the dollar posted a monthly gain, as the US
drought sent corn prices to a record and ECB President Mario Draghi’s pledge to protect the euro buoyed stocks.

THE UNDERPERFORMANCE of European stocks relative to their US counterparts may be ending, due to the current
attractive valuations and an investor belief that the ECB will win the backing of government leaders on a plan to ease the
Eurozone’s debt crisis, according to a leading analyst.

OVERNIGHT, Asian stocks swung between gains and losses and the euro rose as investors awaited a policy
announcement from the ECB after the Federal Reserve pledged more support for the US economy if necessary.
TODAY, European shares are set to open a touch higher, buoyed by expectations the ECB will deliver further stimulus to
tackle the Eurozone crisis at a meeting later in the day.

THE YEN weakened against most major counterparts after the IMF said it is “moderately overvalued,” easing the way for
Japan to try to weaken the currency to aid exporters.

US-led sanctions against Iran are costing OPEC’s third-largest producer $133 million a day in lost sales without raising
global crude prices. Shipments from Iran are down 52% since the sanctions began on July 1st. Annualized, that would
cost the country about $48 billion in revenue, equivalent to 10% of its economy.

S&P’s GSCI Total Return Index of 24 raw materials rose 6.4% in July, the most since October. Hedge funds and other
large speculators are now holding their biggest bet on rising commodity prices since March, according to industry

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