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Monday financial focus

Monday Headlines:
• G20 leaders reluctant to threaten fragile world economy
• UK shoppers stay at home
• Obama ready to work with Republicans on budget plan
• German recovery hinges on stable Eurozone
• Conservative wins first round of Cyprus presidential vote
• China New Year sales stifled by officials
• Asian stocks advance on lack of G20 censure
• Investors ditching the pound as UK disappoints
• Analysts warn G20 leaders will not stop the currency wars
• WTI oil slips on lower US industrial production
• Gold rebounds from worst performance since last May

News:
The G20 nations declared on Saturday there would be no currency
war and deferred plans to set new debt-cutting targets, underlining
broad concern about the fragile state of the world economy.

Shoppers have been deserting the UK’s struggling retailers since the
start of the year, adding to gloom in the sector as sales fall for the first
time in years and well-established firms collapse into administration.
Total UK retail footfall sunk 4.6% over the year to January, data from
the British Retail Consortium and Springboard revealed this morning,
the sharpest drop for nine months.

President Barack Obama is ready to work with Republicans on a plan
to avoid automatic budget cuts that could cripple US defense and
programs vital to the middle class, White House Chief of Staff Denis
McDonough said. The president has a plan to reduce the deficit by
$1.5tn, and Obama will insist that the changes happen in a “balanced
way” which includes revenue increases, McDonough said on one of
three appearances he made on Sunday morning news shows.

German Economy Minister Philipp Rösler stated at the weekend that
the return to strong growth in Europe’s largest economy later this year
depends on stabilization of the Eurozone, expressing guarded
optimism that EU policymakers are getting the upper hand in the
three-year-old sovereign debt crisis.

Conservative leader Nicos Anastasiades easily won the first round in Cyprus’s presidential elections but failed to avoid a
runoff vote, reflecting deep divisions among Cypriots on a bailout deal to save the island nation from bankruptcy. A
financial crash in Cyprus could reignite the Eurozone debt crisis and investors are keen to see Anastasiades, the
strongest advocate of an international rescue, clinch victory and secure a bailout.

Retail sales in China during the week-long Lunar New Year festival rose at the slowest pace in four years as a crackdown
on extravagant spending by officials and state-owned companies limited outlays on food and drink.

Markets:
Overnight, Asian stocks rose, with the MSCI Asia Pacific Index near an 18-month high, as Japanese shares rallied after
the Group of 20 nations refrained from censuring the nation’s policies that have weakened the yen. The regional
benchmark index has advanced 9.6% since the start of November, led by Japanese shares, as Prime Minister Shinzo
Abe pledged to beat deflation and pushed the central bank to ease monetary policy.
Today, Europe’s major stock markets are likely to open mixed, according to analysts, with some dealers expecting
investors to take a cautious approach following the G20 meeting this weekend.

Currencies:
Hedge funds and investment managers are dumping sterling as disappointing growth in the UK, the threat of a
downgrade of its debt and an upcoming change of guard at the Bank of England have fuelled concerns about a drop in
the country’s asset values.

The world’s biggest economies will be able to continue manipulating exchange rates despite reassurances from the G20
leaders it will not happen, analysts warned over the weekend. Although the G20 ruled out the deliberate weakening of
currency values, it is still deemed acceptable as long as the change in exchange rates is a side-product of other policies.

Energy:
New York crude fell for a second day, extending the biggest drop in two weeks, as data from the Federal Reserve
showed that US industrial production unexpectedly shrank in January. Brent futures increased overnight.

Commodities:
Gold advanced overnight, rebounding from its worst weekly performance since May, as prices at the cheapest in six
months lured buyers. Gold prices are down 3.6% since the end of 2012, the worst start to a year since 2001, mostly due
to climbing retail sales and higher than forecast consumer confidence in February.

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