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Financial Focus

Inflation stormed back to 4.5% in April, official data revealed yesterday, provoking widespread attacks on the Bank of England. Mervyn King remains insistent on keeping interest rates at their historical low, despite admitting that it is likely to miss its inflation target constantly until 2013. “At this rate of inflation the value of £1 will decline by half every 13 years,” said Tory backbencher Douglas Carswell. “Not really the basis for creating a prosperous and productive economy, is it?”

EUROPEAN finance ministers are poised to talk with bondholders over extending Greece’s debt-repayment schedule. Europe would consider “reprofiling” Greek bond maturities as part of a package including stepped-up sales of state assets and deeper spending cuts, Luxembourg PM Jean-Claude Juncker said yesterday.

JAPAN’s GDP contracted an annualized 1.9% in the three months ended March 31st after shrinking 1.3% in the previous quarter, according to a Bloomberg survey of economists. The report may bolster bets the Bank of Japan will trail its counterparts in normalizing monetary policy. The central bank is set to end a two-day policy meeting on May 20th.

MARKETS:

THE FTSE 100 index extended its losing streak into a fifth session yesterday, and ending below the 5,900 level for the first time since April 19th. Weak commodities and banks were the main drag on the index, with metal and oil prices falling after weak US housing data revived concerns over the strength of the global economic recovery.

OVERNIGHT, about three shares advanced for every one that declined on the MSCI Asia Pacific Index, helping the measure snap a four-day, 3.3% drop. About 60% of the index’s 1,022 members have released quarterly results since April 11th, with companies posting overall profit growth of about 8%.

EUROPEAN shares are set to rise today, bouncing from four-week lows, as strength in Asian equities and a late rally on Wall Street helped boost sentiment, while a strong rebound in commodity prices was set to lift beaten-down miners and oil majors.

CURRENCIES:

THE DOLLAR fell against the euro for a third day on speculation the US Fed will trail the ECB in tightening monetary policy. The Dollar Index dropped before the US central bank today releases minutes from its April 26-27 meeting, a gathering after which Chairman Ben Bernanke signalled the economy still requires monetary support. The euro was supported by prospects the ECB will raise interest rates even as the region’s debt crisis persists.

ENERGY:

OIL for June delivery gained 1.1% in New York, halting a two-day, 2.7% slump, after an industry-funded report showed gasoline stockpiles dropped and crude inventories at Cushing, Oklahoma, declined the most since June in the US.

COMMODITIES:

COPPER for three-month delivery rose 1.2% London Metal Exchange at one point overnight. Zinc rallied 2.8%, nickel advanced 1.5%, and tin added 1.2%. Corn rose for a fifth day, gaining 0.9% on concern that yields in parts of the US will drop as wet weather delays planting. Wheat futures advanced for a third day, gaining 1.3%.

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