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Financial Focus

A DEFIANT Silvio Berlusconi clung onto power last night, dismissing calls for his resignation as bond yields rocketed to euro-era records and markets see-sawed on rumours he was set to resign. Yields on Italian bonds soared to 6.68%, higher than levels seen in August, when the ECB started buying bonds to lower borrowing costs. The 14 year high has stoked fears that Italy is approaching the point at which its debts will become unsustainable.

MARKETS:

BRITAIN’s blue-chip share index fell yesterday as political turmoil in Italy sparked fears that the euro zone’s largest debtor may fail to deliver much needed economic reforms. The FTSE 100 ended down 16.34 points with banks weighing the most as investors positioned for months of continued uncertainty on the euro front and declining economic prospects.

THE NIKKEI share average tumbled more than 1% this morning, with investors fearful about Europe’s debt situation ahead if an Italian parliamentary vote on budget reforms and as scandal hit Olympus plunged after saying merger and acquisition funds were used to cover security losses.

CURRENCIES:

THE EURO fell for a third day before Italian Prime Minister Silvio Berlusconi faces a budget vote amid pressure to quit and a surge in borrowing costs, stoking concern the region’s debt crisis is spreading. The 17 nation currency slid against the yen ahead of a report today that economists said will show German exports fell in September.

ENERGY:

OIL traded near its highest in three months in New York as signs of shrinking crude supplies in the U.S. countered concern that Europe will struggle to contain its debt crisis. Futures were little changed after advancing for a fourth day yesterday.

COMMODITIES:

THE U.S. is reaping its smallest corn harvest in three years after a drought damaged what was a record crop as recently as July, driving annual prices to an all time high and curbing expansion in global food supplies. The government will forecast production of 314.7 million metric tons tomorrow, 27.4 million tons less than four months ago. The cut is equal to the output of Argentina, the second biggest exporter.

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