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Financial focus

Midweek Headlines:
• Fannie Mae hits $7.6bn profits for quarter
• New EU levy to add £4bn to UK deficit
• Eurozone jobless figures at record high
• PMI data indicates speedier Eurozone contraction
• Cypriot finance minister steps down
• Queen’s gets a £6m tax-free pay boost
• S&P and Dow soar to new records
• Nikkei rebounds 3% on BoJ easing hopes
• European stock index futures signal lower open
• Euro and S&P lower before meetings
• Oil prices drop as US stockpiles increase
• Corn joins crop bear market on slow demand and more planting

News:
US mortgage finance outfit Fannie Mae, which is controlled by the US
government, yesterday posted a $7.6bn quarterly profit, giving the firm
its first year in the black since 2006.

The Financial Transactions Tax will hike sovereign and business
funding costs, meaning George Osborne could be forced to raise £4bn
more through tax hikes or spending cuts, according to new figures
released today. The proposed EU scheme is levied on every step and
intermediary in a transaction, meaning that the 0.1% tax will balloon
into a 1% tax, research by the City of London Corporation shows.
Unemployment continued to soar in the crisis-stricken Eurozone,
figures showed yesterday, climbing to another all-time record in
February. 12% of the Eurozone’s total population is unemployed,
Eurostat said, up from 10.9% last year.

The Eurozone’s manufacturing purchasing managers’ index, a widelyregarded
business survey, slumped from 47.9 in February to 46.8 last
month, numbers from Markit showed – further below 50 and hence
indicating speedier contraction in the sector. This was the 19th
successive month with a PMI below 50, suggesting the sector has
been in decline for more than a year and a half.

The finance minister of Cyprus quit yesterday after a month in the job, saying he had completed his task to seal a bailout
for the Eurozone country. Michael Sarris is also likely to come under scrutiny from a new judge-led probe into the banking
crisis that prompted Cyprus’s €10bn bailout. He was chairman of stricken bank Laiki until August.
The Queen of England has received a 16% ‘pay rise’ after a new all-in-one payment called the Sovereign Support Grant,
ushered in by chancellor George Osborne, came into effect yesterday. The monarch’s annual tax-free grant is now fixed
at 15% of the Crown Estate’s annual profits, and takes her income from £30m to £36.1m

Markets:
Yesterday, US share indexes climbed to record highs after equity markets continued to rally past their pre-financial crisis
peaks. The Dow rallied to an intraday high of around 14,684, beating a record high of 14,285 set last month. The S&P
500 also closed at another high of 1,570, but failed to pass its intraday record of 1,576.09.

Overnight Japan’s Nikkei average jumped 3%, its biggest one-day rise in two months, as investors bought beaten-down
shares on expectations that the central bank will announce more easing steps on Thursday.
Today, European stock index futures pointed to a lower open, with investors taking some profits on the previous
session’s solid gains ahead of key US data.

Currencies:
The euro remained lower following a drop yesterday amid speculation the ECB will use its meeting tomorrow to signal
future economic stimulus. The yen also fell as the Bank of Japan starts a two-day gathering at which it’s expected to
increase monthly bond purchases to combat deflation.

Energy:
WTI oil fell for the second time in three days after an industry report showed US crude stockpiles increased the most in
four weeks and a government order prevented the restart of a pipeline to the Texas Gulf Coast.

Commodities:
Nine months after a US drought sparked a surge in global crop prices, corn has joined soybeans and wheat in a bearmarket
slump as demand slows and farmers prepare to boost output in 2013. Corn futures in Chicago plunged 13%
since the US Department of Agriculture said on March 28th that inventories were bigger than analysts forecast and that
farmers will plant the most acres this year since 1936.

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