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Financial Focus

ECB President Jean-Claude Trichet rejected any direct ECB participation in a second bailout for Greece, escalating a clash with governments as they rush to craft a solution involving investors. As politicians try to find a plan by the 24th of June that would share the cost of a new rescue with bondholders, Trichet yesterday ruled out the ECB setting an example with its own assets. While the bank has said it could accept a plan in which investors voluntarily buy Greek bonds to replace maturing debt, Trichet said the ECB has no intention of rolling over its own Greek holdings.

THE BANK OF ENGLAND is increasingly expected to anchor interest rates at their historic low for the duration of 2011, prompting lenders to slash interest on fixed rate mortgages. Two year fixed rate loans dropped to their lowest cost since the beginning of the year yesterday as the bank rate was held at 0.5% for the 27th month in a row. “The financial markets are not pricing in an interest rate hike until May of next year,” commented Markit’s Chris Williamson, after the bank confirmed its latest decision.

MARKETS:

ASIAN stocks dropped, dragging the regional benchmark index to its biggest streak of weekly losses since October 2008, on concern that the region’s central bank will keep raising the interest rate to tame inflation even amid signs the global economic recovery may be faltering.

EUROPEAN shares are set to dip today, reversing the gains from yesterday’s session to mirror the losses in Asia, and a late session pullback on Wall Street, with lingering concerns over the pace of economic growth seen prompting some caution among investors. Traders said that sentiment remained fragile as data showing the pace of China’s export growth, which slowed in May, added to recent fears over the outlook for global growth.

CURRENCIES:

THE EURO was set for the first weekly drop in four versus the dollar on the prospect that the European Central Bank will slow the pace of interest-rate increases. The common currency also depreciated against 10 of its 16 major counterparts amid concern that the region will take a longer time to agree on how to solve Greece’s sovereign debt crisis.

ENERGY:

OIL traded near the highest this month, heading for the biggest weekly gain in four weeks, after the U.S. trade deficit unexpectedly narrowed and OPEC’s secretary general said that the group’s production quota system has been weakened. Brent Crude for July delivery gained 27 cents, or 0.2%, to $119.84 a barrel on the London based ICE Futures Europe Exchange.

COMMODITIES:

GOLD is set to advance for a fourth weekly gain as concern about Europe’s sovereign debt crisis and slowing economic growth spur demand for the precious metal as an alternative investment. Silver for immediate delivery rose as much as 0.8% to $37.8650 an ounce, the highest level since June the 1st. The price is up 3.8% this week, rebounding from a 4.6% loss last week. Cash Platinum rose as much as 0.5% to $1848.25 an ounce the highest level since May the 4th.

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