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Friday financial focus

Friday Headlines:
• Global: OECD predicts stronger growth this year
• Cyprus: Orderly queues as banks reopen
• China: ‘Renewed reform momentum’ needed
• China & Brazil: Currency-swap deal agreed
• USA: Economy grows faster than expected in Q4 2012
• Russia: Rates likely to be held as inflation tops growth worry
• Markets: S&P 500 closes at record high, Nikkei also rising
• Currencies: Yen extends losses, sterling at 4-year low against USD
• Energy: Oil rises to cap longest rally this year
• Commodities: Gold set for worst quarterly run since 2001
• Focus on: Fund manager sentiment more positive on banks

Global: OECD predicts stronger growth this year.
The world’s major economies will see stronger growth this year, but
Europe’s recovery will continue to be slow, the OECD has said. The
OECD predicted stronger growth in the US, Japan and Germany. But
it said concerns remained over the recovery of the wider Eurozone. It
said governments would need to keep special measures in place to
boost economic growth. Overall, the OECD forecast an average
annualised growth of 2.4% among the seven biggest economies in the
first quarter of this year. That suggests a marked recovery from the
last three months of 2012, when leading economies shrank at an
annualised rate of 0.5%.

Cyprus: Global stocks rally as banks reopen
Cypriots queued at banks as they reopened on Thursday under tight
controls imposed on transactions, but there was no sign of a run on
deposits that had been feared after the government was forced to
accept a stringent EU rescue package. Banks were shut almost two
weeks ago as the government negotiated a €10bn international bailout
to avert a national bankruptcy, the first in Europe’s single currency
zone to impose losses on bank depositors.

China: ‘Renewed reform momentum’ needed
China needs a “renewed reform momentum” to sustain long-term
growth, the OECD has said. It said the financial sector, urbanization, state ownership and innovation were key areas for
reforms. But it added that China had weathered the global financial crisis better than other OECD member countries. It
said China was on track to become the world’s biggest economy by 2016, after allowing for price differences. “It is well
placed to enjoy a fourth decade of rapid catch-up,” the OECD said in a survey. It also said that there were signs of
China’s economic growth picking up pace again after the recent slowdown. However, it warned that in order “to sustain
vigorous and socially inclusive growth over the longer run, renewed reform momentum is required”.

China & Brazil: Currency-swap deal agreed
China and Brazil have signed a currency swap deal, designed to safeguard against future global financial crises. The
pact, first announced last year, will allow their central banks to swap local currencies worth up to 190bn yuan or 60bn
reais ($30bn). Officials said this will ensure smooth bilateral trade, regardless of global financial conditions. Along with
being the world’s second-largest economy, China is also Brazil’s biggest trading partner. “If there were shocks to the
global financial market, with credit running short, we’d have credit from our biggest international partner, so there would
be no interruption of trade,” said Guido Mantega, Brazil’s economy minister. The agreement was signed as part of the
fifth Brics (Brazil, Russia, India, China and South Africa) summit being held in Durban, South Africa.

USA: Economy grows faster than expected in Q4 2012
The US economy grew at a faster than expected 0.4% in the fourth quarter of 2012, the Department of Commerce has
said. The annualised figure was better than an earlier estimate of 0.1% growth, reflecting increased investments in plant
and equipment. However, despite the upwards revision, the department warned that the economy remained “sluggish”.
The latest figures were a marked slowdown from the previous quarter. An acute fall in defence spending and government
expenditures hurt economic output, said the department.

Russia: Rates likely to be held as inflation tops growth worry
Russia will probably leave interest rates unchanged for a seventh month as inflation remains more than a percentage
point above the upper end of the central bank’s target range. The refinancing rate will remain at 8.25% when policy
makers meet in Moscow on April 2nd, according to 16 of 20 economists in a Bloomberg survey. Four forecast a quarterpoint
cut. The overnight and one-week auction-based repurchase rates, the main instruments used to provide banks with
cash, will be held at 5.5% and the deposit rate will stay at 4.5%, two other surveys showed.

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