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Financial Focus

Greece was struck by multiple ratings agencies yesterday, following the EU’s admission on Friday that Athens will not be ready to return to markets for cash next year, as is required by the terms of the 110bn bailout. S&P downgraded Greek debt to B, one notch above Pakistan’s bonds, warning that any voluntary debt restructuring by Athens would amount to a default.

China reported a trade surplus that was more than three times larger than forecast in April as exports surged to a record, bolstering the US case for faster yuan gains. Exports climbed 30% to $156 billion while import growth slowed to 22%. The rebound in China’s surplus to its highest this year may add pressure on the world’s biggest exporter and holder of foreign exchange reserves to address imbalances and reduce inflation through steeper yaun appreciation.

BERNANKE’S $600 billion strike against deflation is paying off, as stock and debt markets rise, bank lending grows and economists forecast faster growth. The S&P 500 index has gained 13.5% since the Fed chairman announced the plan to buy Treasuries through its quantitative easing policy. The fed last month said that it would not need to extend the $600 billion buying program beyond its scheduled end next month. Payrolls expanded by 244,000 in April and the jobless rate climbed to 9%, the first increase since November. “We are starting to see the impact, albeit slowly,” said Jim Sarni, managing principal at Payden & Rygel. “We have a long way to go, but at least we have stopped the hemorrhaging”.

MARKETS:

EUROPEAN stocks are set to inch higher today; reversing some of yesterday’s losses as robust Chinese trade data revived optimism over the pace of global growth. Gains could be limited, however, by the lingering concerns over debt-ridden Greece that weighed on markets yesterday. The euro zone’s blue chip Euro STOXX 50 lost 1.7% yesterday its biggest one day fall in 3 weeks.

CURRENCIES:

STERLING fell to its lowest in nearly three weeks against the dollar on Monday, dragged down by falls in the Euro against the U.S. currency as a downgrade of Greece’s debt worsened euro zone debt worries. The pound dipped against the Euro, although the single currency stayed well below last week’s 13 month high of 90.43 pence.

ENERGY:

OIL SLID from a 3 day high as investors sold to profit from the biggest price surge since February, amid speculation that U.S. crude stockpiles increased to near the highest in 2 years. Futures dropped as much as 2% before an Energy Department report tomorrow that may show inventories climbed for a third week.

COMMODITIES:

SILVER futures climbed, extending their rebound from the worst weekly drop since at least 1975, after S&P cut Greece’s credit ratings. Silver futures jumped as much as 2.1% to $37.90 an ounce. The metal slumped 27% last week as investors sold commodities from oil to copper.

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