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Financial Focus

The Greek parliament fell into line yesterday and voted through the budget laws needed to qualify for a 12bn aid tranche. However, the vote only buys time and the EU is racing to put together another bailout, likely to be worth over 100bn, to forestall a default in 2012. As part of the second rescue, German banks have agreed to participate in a scheme which will see banks roll over Athen’s debt in return for a high interest rate. �

Turkey has outpaced China with first quarter annualised economic growth of 11%, but its red-hot economy is proving more of a headache for policymakers rather than a cause for celebration. The data, showing quarter on quarter growth of 1.4% driven mainly by consumer spending, will fuel doubts over the central bank’s unorthodox attempts to cool the economy by limiting banks lending, rather than raising interest rates.

ECB president Jean-Claude Trichet yesterday made an appeal to EU lawmakers to abandon plans for a devastating tax on financial transactions. The European Commission wants to raise 200bn by imposing a 0.05% fee on every type of financial transaction across the EU, to fund higher spending from 2014 onwards.

MARKETS:

SINGAPORE shares rose at midday today, with banks outperforming the broader market, as overall sentiment was boosted by U.S. data showing factory activity had accelerated in June as well as a temporary solution to Greece’s debt woes. European shares are set to open flat to slightly lower today, pausing for breath having hit a near-one month high in the previous session, with downbeat factory output data from China prompting some caution among investors ahead of manufacturing figures from the euro zone due later in the session.

CURRENCIES:

THE EURO was poised for its biggest weekly gain in a month versus the dollar as traders increased the bets the ECB will tighten monetary policy and Greece progressed in staving off default. The dollar was set to rise for a second week against the yen before a report forecast to show U.S. consumer confidence was stronger than previously reported.

ENERGY:

OIL declined, trimming the biggest weekly gain in almost three months, as signs of slowing manufacturing growth in China and the U.S. stoked speculation fuel demand may falter. Futures slipped as much as 0.8%, dropping for the first day in four, after China’s Purchasing Managers Index fell to the lowest since February 2009.

COMMODITIES:

COPPER in London dropped for the first time in four days as manufacturing in China, the world’s largest user, shrank to the lowest level since February 2009. Three month copper on the London Metal Exchange lost as much as 0.9% a metric ton.

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