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Friday financial focus

Weekly Headlines:
• Japan: Bank of Japan agrees to double inflation target
• China: Manufacturing grows at fastest pace in two years
• Spain: Unemployment rate rises to 26%
• Germany: Investor confidence takes surprising leap
• Italy: Monti under fire over bank crisis
• UK: Osborne sticks to austerity as GDP data emerge
• Companies: Apple doubles iPhone sales points in China
• Currencies: Asian currencies fall most in 6 months
• Commodities: Gold set to rally this year
• Focus on: China set for a mini bull market?

Japan: Bank of Jan agrees to double inflation target
The Bank of Japan (BOJ) has agreed to double its inflation target to 2%
and ease monetary policy, meeting key demands of Japan’s new
government. Japan’s central bank has guarded its independence and
there were fears it may resist Prime Minister Shinzo Abe’s calls for it to
do more to help growth, but the BOJ has gone further than many
analysts predicted, offering to do open-ended asset purchases from
2014, expected to pump billions of yen into the economy. “This is very
good news,” said Brian Redican, from Macquarie in Sydney. “For once,
the BOJ has been more aggressive than the market expected. The
government is clearly forcing the pace of change, which is no bad thing.
The BOJ has talked about targeting inflation for years without any
success, but these changes are more credible.”

China: Manufacturing grows at fastest pace in two years
Manufacturing activity in China grew at its fastest pace in two years in
January, according to data from HSBC. The preliminary reading of the
Purchasing Managers Index (PMI) was 51.9, compared with 51.5 in
December. Levels above 50 indicate expansion. China’s leaders have
taken steps to boost the country’s growth, of which manufacturing is a
major component. The data is the latest sign that the world’s secondlargest
economy is recovering after a sharp slowdown. “Despite the still
tepid external demand, the domestic-driven restocking process is likely to
add steam to China’s ongoing recovery in the coming months,” said Qu
Hongbin, chief China economist at HSBC.

Spain: Unemployment rate rises to 26%
Spain’s unemployment rate has soared to its highest level since measurements began in the 1970s as a prolonged
recession and deep spending cuts left almost 6 million people out of work at the end of last year. Spain’s unemployment
rate rose to 26% in the fourth quarter of 2012, or 5.97 million people, the National Statistics Institute said on Thursday, up
from 25% in the previous quarter and more than double the European Union average. Spain sank into its second
recession since 2009 at the end of 2011 after a burst housing bubble left millions of low-skilled labourers out of work.

Germany: Investor confidence takes surprising leap
German investor confidence jumped surprisingly this month above its long-term average to a level not seen since May
2010, the ZEW Center for European Economic Research said on Tuesday. The ZEW’s economic sentiment indicator,
which gauges investors’ six-month outlook, surged by 24.6 points this month to 31.5. Analysts had expected a 12 point
increase. The report means that a significant majority of investors sees conditions improving after the fourth quarter’s
estimated 0.5% quarterly decline in German GDP. “The financial market experts seem to expect that the positive
sentiment on the financial markets may soon result in companies realizing investments that had been postponed early
on,” ZEW President Wolfgang Franz said. “However, the economic situation of important trade partners is rightly
considered to still be weak. This suggests that the German economy will further grow at a moderate level in 2013.”

Italy: Monti under fire over bank crisis
Shares in Italy’s third largest bank by assets, which has requested a second bailout in four years, have plunged
since revelations five days ago of derivatives transactions that may force the 500-year-old bank to restate hundreds
of millions of euros of losses. Supervision of the struggling institution by the Bank of Italy while Mario Draghi,
European Central Bank president, was governor has come under attack as an increasingly fierce political outcry
erupts in the run up to national elections next month. Analysts remain concerned that the derivative losses, which
are expected to push the bank to a €2bn annual loss in 2012, may increase the risk of the bank being partially
nationalised as it will force the stake to take an equity stake as it will not be able to repay its bailout bonds.

UK: Osborne sticks to austerity as GDP data emerge
George Osborne has vowed to stick to his austerity drive even if the UK economy contracted at the end of last year.
Addressing business leaders at the World Economic Forum in Davos, the chancellor gave no hints about the strength of
GDP figures to be published on today, but repeated past comments that the economy was “walking a difficult road, but
heading in the right direction”. Economists’ forecasts for the quarter are unusually wide, from growth of 0.2% to
contraction of 0.5% – which follows expansion by 0.9% in the third quarter.

Friday data 0610 UK (FT.COM)
Index Value Change
since last session
FTSE 100 6,264.91 +1.09%
S&P 500 1,494.82 0.00%
Eurofirst 300 1,171.06 +0.29%
Nikkei 225 10,887.72 +2.51%
Shanghai 2,295.80 -0.30%
Commodities Value Change
since last session
WTI Crude $95.90 -0.05%
Brent Crude $113.10 -0.16%
Gold 100oz $1,663.00 -0.39%
Copper $366.45 0.00%
Corn $726.00 +0.28%
Forex Pair Value Change
since last session
$ per € 1.3362 -0.10%
$ per £ 1.5772 -0.10%
¥ per $ 90.4300 +0.11%
¥ per € 120.8300 -0.09%
€ per £ 1.1803 +0.02%
Bonds Rate Change
since last session
10Y UK Gov 2.00% -0.01%
2Y US Gov 0.25% 0.00%
10Y US Gov 1.85% 0.00%
10Y Japan 0.73% 0.00%
10Y Bund 1.57% -0.01%

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