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Financial Focus

EMBATTLED Italian Prime Minister Silvio Berlusconi will step down once new austerity measures are passed, President Giorgio Napolitano announced last night. Austerity measures could be passed as soon as mid-November, at which point he would be expected to resign. Continued uncertainty over Berlusconi’s ability to secure these all important reforms has driven investors away from Italy.

THE RESTRUCTURING of Greek sovereign debt risks leaving banks more exposed to future financial crisis of other countries, according to the man who helped orchestrate the so-called ‘private sector involvement’ in the rescue plan for Athens. Banks and other bondholders that volunteer for a 50% cut in the value of Greek sovereign debt could set a precedent for other sovereign haircuts, according to Josef Ackerman, chief executive of Deutsche Bank.

GEORGE OSBORNE yesterday slammed plans for a Europe-wide Tobin tax as a ‘big tax on pensioners’, even as Britain’s government continues to support a global version of the levy. The chancellor told a stormy meeting of finance ministers in Brussels that a transaction tax applied only in Europe would cost the region 995,000 jobs. Osborne fears that a European tax would lead to financial services companies leaving Europe for the U.S. and Asia.

MARKETS:

EUROPEAN shares are set to jump today as Italian Prime Minister Silvio Berlusconi’s pledge to resign after failing to secure a majority in a crucial vote revived hopes a new leader would more aggressively tackle the country’s debt problems. The news from Italy also impacted on the Asian markets as the NIKKEI rose this morning in reaction adding 1.2% whilst the broader Topix index gained 1.5%. SINGAPORE shares were down by midday, erasing earlier gains, with palm oil firm Wilmar International among the worst performing stocks. Investors remained cautious because of the lingering concerns that the European debt crisis is far from being resolved.

CURRENCIES:

THE YEN advanced against the majority of its most traded peers as concern waned that the Bank of Japan will act to weaken the currency. The yen climbed to its strongest versus the dollar since October the 31st, when Japan made what’s estimated to be its biggest currency market intervention to curb gains.

ENERGY:

OIL rose for a sixth day in New York on speculation that Iran’s nuclear plans threaten Middle East stability and an offer to resign by Italy’s Prime Minister brings Europe closer to solving its debt crisis. Futures advanced as much as 0.5%, matching the longest run of gains since the six days ended November the 8th 2010.

COMMODITIES:

THE BIGGEST decline in aluminium prices since the global recession means at least 25% of the world’s smelters may be unprofitable. The metal fell 22% to $2,151 a metric ton on the London Metal Exchange since May the 1st and energy costs gained 16% in the past month.

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