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Financial Focus

Silvio Berlusconi insisted on Wednesday that Italy was strong enough to overcome turmoil on international debt markets, blaming its soaring borrowing costs on factors beyond Rome’s control, including speculators,a crisis of confidence in the eurozone system and slowing growth in big economies. In a highly anticipated speech to parliament, delayed until after the close of markets in Milan, the prime minister defended his centre-right government’s record but offered no new initiatives to calm investors’ fears of a country that would need an EU bail-out if current borrowing conditions persisted.

MARKETS:

After trading sharply lower most of the day, stocks slowly climbed back to end Wednesday’s session modestly positive, ending an eight-day losing streak for the Dow. It was a big comeback for the market, where the Dow had been down as much as 166 points earlier in the session. Investors found some solace in upbeat comments from Fed governors Donald Kohn, Vincent Reinhart and Brian Madigan, who told the Wall Street Journal that the Fed may consider another round of stimulus.

Britain’s FTSE 100 slumped below 5,600 and gold soared on Wednesday, amid mounting fears over the strength of the global recovery and ongoing concerns about Europe’s debt crisis. The benchmark UK index of blue-chip shares tanked 2.34%, or 134 points, to 5,585, its lowest level since early December, and the Mid-250 index lost 1.73%, or 194 points, to 10,995. ‘It is the now familiar double-whammy of “sovereign debt and a stumbling recovery that has smashed sentiment once again today,’ said David Jones at IG Index.

CURRENCIES:

A day after the Swiss National Bank unexpectedly cut rates to weaken its currency, the yen tumbled around 2.5% against the dollar after repeated yen selling by the Bank of Japan. Increased activity by authorities in the past 24 hours to curb gains in what were considered the safest currencies in the G10 has made traders nervous that policymakers were cracking down simultaneously in markets, with the New Zealand dollar dropping further from a post-float high after the country’s finance minister said he preferred the currency to be weaker.

ENERGY:

The latest U.S. oil inventory data contradict a widely held notion among oil traders that a huge glut of Canadian and U.S. shale crude oil is accumulating in the middle of the United States and causing the record gap in global oil benchmark prices. Instead, U.S. commercial crude oil inventories in the Midwest and Cushing, Oklahoma, fell last week to their lowest this year.

COMMODITIES:

Gold prices have hit a nominal record high for the second day running as investors pile into the precious metal amid worries about the global economy. Spot bullion in London on Wednesday reached a record of $1,672.65 a troy ounce, up 0.8 per cent on the day, after a report released on Tuesday showed that US consumers cut back on spending in June for the first time since September 2009.

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