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Financial Focus

STUBBORN UK inflation bounced back up in July, official figures revealed yesterday, hitting 4.4% in the consumer price index, up from 4.2% in June. The Bank of England expects CPI inflation to progress further than this moving beyond 5% in the coming months, two and a half times its 2% target rate.

GERMAN chancellor Angela Merkel rocked investors last night with a shock commitment to push for an EU wide financial transactions tax, often known as a Tobin tax. The plans for a Europe wide levy would knock the Square Mile, threatening to push even more jobs to lower tax corners of the global market.

SPAIN’S tentative recovery lost momentum in the second quarter as the Eurozone’s fourth largest economy suffered the effects of a deepening sovereign debt crisis, official data showed yesterday. Spain’s GDP rose at a quarterly rate of 0.2% in the second quarter down from a 0.3% expansion in Q1.

MARKETS:

BRITAIN’S FTSE 100 is expected to open lower this morning, after leaders in Germany and France failed to give investors hope the euro zone debt crisis could be contained, with Wall Street and Asian shares falling. Wall Street was hit by the news and snapped three days of gains, while Japanese shares also fell, led by technology stocks. The FTSE 100 index closed slightly higher yesterday as banks made a late afternoon recovery after Fitch confirmed that the nation’s top credit rating with a stable outlook and better-than-expected industrial output in the United States.

INDIA’S benchmark stock index advance for the first time in four days as some investors judged recent declines as excessive. The Bombay Stock Exchange Sensitive Index or Sensex rallied 227.9 points or 1.4% in Mumbai. The Sensex has lost 18% this year, the worst performer after Brazil’s Bovespa Index among the world’s 10 biggest markets, on concern higher borrowing costs will slow economic growth and erode company earnings.

CURRENCIES:

THE EURO declined against the yen for a second day after the leaders of Germany and France rejected calls for a joint borrowing plan to stem the region’s debt crisis and amid signs that growth is slowing. The euro also weakened for the first time in five days versus the Swiss franc before data today forecast to show European inflation slowed in July.

ENERGY:

OIL climbed 0.5% a barrel in electronic trading on the New York Mercantile Exchange. The contract rose as much as 0.7% after the industry funded American Petroleum Institute said U.S. gasoline stockpiles fell last week to the lowest since June 2009.

COMMODITIES:

COPPER advanced as Chinese buying continued to draw down inventories at the London Metal Exchange warehouses. Three month copper on the LME rose as much as 0.7% to $8,890 per metric ton, and was at $8,886 by 10:27 in Shanghai. Copper inventories tracked by the LME around the world have fallen for three consecutive weeks to 461,775 tons as of August the 12th.

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