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Financial Focus

UK manufacturing expanded at its slowest pace in seven months in April and a slowdown in new orders dimmed hopes that the UK economy would pick up after a weak recovery at the start of the year. The PMI headline index fell to 54.6, well below even the most bearish analyst’s forecast, suggesting the recent strong performance by manufacturers is starting to weaken as domestic demand wanes. The slowdown supported views that the Bank of England will delay even further raising interest rates from the record 0.5% low, as it waits for the economy to pick up after making a sluggish recovery from a shock decline at the endof 2010.

Portugal last night struck a deal with the ECB, EU and IMF for an international bailout worth 78bn, to ease its debt burden for a three-year period. In a televised address, the country’scaretaker prime minister, JoseSocrates, said he had got a good deal, although few details of the loan were given.

US employment increased by 198,000 in April, after a 201,000 gain in March, according to a Bloomberg survey of economists, ahead of the ADP Employer Services report that is due out today.

THE INSTITUTE for Supply Management’s index of non-manufacturing companies in the US rose to 57.5 in April from 57.3 the previous month, a separate Bloomberg survey showed.

MARKETS:

THE FTSEurofirst 300 index of top European shares dropped yesterday to snap an eight-session rally. The FTSE 100 had a late surge to take it out of negative territory and record a modest gain.

OVERNIGHT, the Shanghai Composite Index and Hong Kong’s Hang Seng Index both fell by more than 1.5% as investors look to avoid risk as China and other emerging markets look likely to introduce new measures to battle inflation. Commodities face the brunt of the pressure as confidence in demand weakens.

EUROPEAN shares are set to dip today, tracking falls in Asia and in Wall Street overnight, with weak commodity prices expected to weigh on heavyweight mining and energy firms.

CURRENCIES:

THE EURO was at £0.89 overnight, within striking distance of a 13-mth high of £0.90 hit on Tuesday. The common currency climbed 1.1% on Tuesday after disappointing UK PMI data signalled that a rate hike by the BoE might be further away than expected. In contrast, the ECB is expected to signal its readiness to raise interest rates after its policy meeting on Thursday, and may prepare the market for a June hike.

ENERGY:

CRUDE for June delivery traded at $110.59 a barrel, after earlier declining as much as 0.7% to $110.23, in New York. Futures dropped after US inventories climbed 3.2 million barrels last week.

COMMODITIES:

SILVER futures tumbled for a third day as higher margin requirements cut demand. The minimum amount of cash that must be deposited when borrowing from brokers to trade silver futures, rose from $14,513 to $16,200 per contract yesterday, helping set the metal on its worst run since January. The margin was just $4,250 a year ago. Copper nickel, tin and aluminium also dropped, as demand from China appears to be weakening.

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