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Greek Prime Minister George Papandreou said he will form a new cabinet today and seek a vote of confidence from his own party to push through a harsh austerity bill, as riot police battled tens of thousands of protesters in the heart of Athens. Greece must agree the tax rises and spending cuts before the EU and IMF will sanction a bailout of 12bn that Athens needs to pay back debt that matures in August.

THE BANK of England could have stopped inflation rising above target but chose to prioritise economic output by keeping rates at their historic low, governor Sir Mervyn King said at the Lord Mayor’s banquet at Mansion House last night. Raising interest rates “would have meant a weaker recovery, or even further falls in output” King said.

INDUSTRIAL production in the Eurozone edged up by 0.2% in April, surprising economists who had expected a slight dip. In March production had remained level across the 17-nation single currency area. Compared to the same time the previous year, industrial output was up 5.2%. Across the wider European Union area, industrial production was up 0.1% on the month, and 4.7% from the same point last year.

MARKETS:

ASIAN stocks slid to their lowest level in nearly three months overnight as Greece’s debt troubles deepened and fresh US data indicated its economic slow-down could drag on longer than expected.

YESTERDAY’s unrest in Greece played havoc with the markets, helping send the Dax down 1.3%, the Nasdaq 1.8% and the FTSE 1% as investors bet that a wave of Greek chaos could engulf the world economy.

FINANCIAL bookmakers expect the leading European benchmark indexes to fall today, adding to the previous session’s sell-off on mounting worries over Greece’s debt crisis. “While finance ministers remain in deadlock over the steps to take next, the market will continue to worry that Greece will default,” a market analyst commented.

CURRENCIES:

AS THE EURO sags, the dollar index held near a three-week high after having jumped 1.7% yesterday, its biggest one-day percentage gain since August 2010. The dollar also held firm against safe-haven currencies like the Swiss franc and yen.

ENERGY:

CRUDE climbed overnight in New York, following a 4.6% slump yesterday that sent prices to the lowest settlement since February 22nd. Many believe that yesterdays sell-off was exaggerated, and that there are signs that Chinese demand will increase.

COMMODITIES:

GOLD lost its footing overnight after the dollar jumped against other currencies, but euro zone debt jitters could limit losses as investors fretted about the lack of resolution to solve the crisis in Greece.

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