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Monday money

• US economy faces a fresh financial shock
• US job market probably made headway in January
• Clegg says UK to continue its fiscal squeeze
• China industrial companies’ profits climb for fourth month
• Carney willing to take a more activist stance
• Japan to raise more money from taxes than bond sales
• Argentina has a week to present its debt case to US court
• Cyprus banks face money laundering probe
• China’s stocks at 7-month high; Nikkei slips after 11,000 breakthrough
• European shares set track Wall Street gains.
• Yi Gang urges G-20 nations to collaborate over currencies
• Oil near its highest in four months on hopes of economic recovery
• Russia & Kazakhstan expand gold reserves

The $1.2tn in automatic spending cuts that Barack Obama once
promised to avert – the so called ‘sequester’ – are increasingly likely to
occur because of entrenched politics in Washington. The sequester is a
budgetary mechanism passed in 2011 that takes effect on March 1st and
slashes the Pentagon’s budget by $600bn over 10 years while cutting
discretionary spending for government programmes by another $600bn.
The job market in the US probably kept making headway in January
even in the face of Washington’s budget battles, economists said before
reports this week.

Deputy Prime Minister Nick Clegg said the coalition government would
stick to plans for the biggest fiscal squeeze since World War II even after
the UK economy contracted by 0.3% in the fourth quarter.

Chinese industrial companies’ profits rose for a fourth month in
December, adding to signs the country’s economic rebound is gaining
momentum. Industrial profits may rise by an average 30% this year as
the world’s second-biggest economy recovers from a seven-quarter
slowdown, Standard Chartered Plc forecasts.

Mark Carney, the next Bank of England governor, indicated in a speech in Davos that he would be willing to take a more
activist stance on monetary policy even it that meant inflation remained above the 2% target for some time.
Japan plans to cut its reliance on government bonds, as Prime Minister Shinzo Abe tries to demonstrate determination to
repair the state’s stretched finances. The Liberal Democratic party at the weekend unveiled a draft budget that for the first
time in four years will raise more money through taxes than bond sales.

Argentina has a week to convince a US court that it should not have to pay $1.33bn to holders of its defaulted debt. On
Friday, the day that Argentina must submit its brief to the Second Circuit Court of Appeals in New York, the IMF’s board
meets to decide whether to censure the country for its faulty inflation data in what would be an unprecedented step and
an embarrassment for the member of the G20 group of leading economies.

Cyprus and its EU bailout lenders are in talks to hire outside investigators to probe the island’s banking system for signs
of money laundering. The move comes amid concerns in Germany that a €17bn Cypriot bailout would shore up financial
institutions protecting illicit Russian deposits.

Markets:
Overnight, Japan’s Nikkei slipped as investors secured profits and waited for further cues from corporate earnings after
the index briefly pierced a fresh 32-month high above 11,000 in early trade. In China, stocks rose, driving the Shanghai
Composite Index to its highest level in seven months, after industrial profits climbed for a fourth month in December.
Today, European stocks are seen rising, set to gain ground for the fourth straight session and tracking a rally on Wall
Street where a surprisingly good start of the earnings season has propelled the S&P 500 above 1,500 points for the first
time in more than five years.

Currencies:
China’s foreign-exchange regulator, Yi Gang, urged G-20 nations to improve collaboration to avoid any so-called
currency wars, while signaling he’s comfortable with the value of the yuan. There needs to be “better communication and
coordination” on foreign exchange between the G-20, he said at the World Economic Forum’s annual meeting in Davos.

Energy:
Oil traded near the highest price in four months in New York after posting the longest run of weekly gains since April
2009, lifted by speculation that a global economic recovery will boost fuel demand.

Commodities:
Russia and Kazakhstan expanded their gold holdings in December, seeking to diversify their reserves as the metal
capped a 12th annual advance and investors raised holdings to an all-time high.

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