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Financial Focus

Germany has made an audacious attempt to seize the initiative in Greek bailout negotiations, telling the ECB that private investors in Athens’ debt must accept a seven year increase in the maturity of their bonds. In a letter to the ECB, German finance minister Wolfgang Schaeuble said, “Any additional financial support for Greece has to involve a fair burden-sharing between tax payers and private investors.” The ECB has repeatedly rebuffed any attempt to introduce even a mild form of debt restructuring for private buyers of Greece’s debt. However, Germany has dug its heels in, setting the stage for a pitched battle over the fate of the single currency. Schaeuble says a new bailout “has to lead to a quantified and substantial contribution of bondholders to the support effort.”

MARKETS:

ASIAN stocks fell, dragging the regional benchmark index to its lowest level in two weeks, after the Federal Reserve said the U.S. economy is slowing in some regions. The MSCI Asia Pacific Index fell 0.6% heading for its lowest close since the 25th of May. About three stocks dropped for every two that rose in the gauge.

EUROPEAN stock indexes are predicted to fall today, poised to lose ground for the seventh straight session as negative sentiment has worsened since Fed Chairmen Ben Bernanke gave no indication that the central bank would offer a third round of stimulus to the frail U.S. economic recovery. In addition investors are waiting for news from the ECB’s post policy meeting today for more insight on the outlook for interest rates and the central banks view on the economy.

CURRENCIES:

THE EURO climbed toward a one month high versus the dollar on speculation that the ECB President Jean-Claude Trichet will today signal policy makers are likely to raise interest rates next month. The Euro rose to $1.4622 in Tokyo from $1.4583 in New York yesterday. The currency climbed 0.5% to 117.11 yen. The yen fell to 80.09 per dollar from 79.89 yesterday, when it touched 79.70, the highest level in a month.

ENERGY:

OIL rose for a third day after OPEC failed to reach an agreement on production targets for the first time in 20 years and U.S. crude inventories fell more than analysts forecast. Brent has advanced 24% this year as the unrest in the Middle East and North Africa that toppled leaders in Tunisia and Egypt, spread to Libya. The fighting in Libya has removed about 1.5 million barrels a day of output from the market. “You may start to see higher oil prices as the question mark over future supple grows larger,” said Ben Westmore at National Australia Bank. “There is now some question arising as to how OPEC is to step in and fill the breach.”

COMMODITIES:

GOLD may advance for the first time in three days after grain and energy prices surged boosting the precious metal’s appeal as a hedge against inflation. Gold has gained 25% in the past year, reaching an all time high of $1,577.57 on the 2nd of May. “You might see some support on the back of food inflation with corn and wheat, particularly corn, gaining,” said Jonathan Barratt at Commodity Broking Services. “You might find people starting to reassess the food-inflation aspect.”

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