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Financial Focus

THE EUROZONE economy has contracted over the past year, official
figures revealed yesterday, with industry data showing even Germany has
been hit by the dire state of its weaker neighbours’ economies. Eurozone
GDP registered no growth in the first quarter of this year, after falling 0.3%
in Q4 2011 – narrowly avoiding a technical recession, but nonetheless
leaving the economy 0.1% smaller than it was in the first quarter of 2011.

THE EUROPEAN Commission has finally unveiled a new set of
regulations that are meant to ensure taxpayers will never again have to
bail out a failed bank. A major tool will be “bail-in bonds” – inserting a
clause into all banks’ debt that means even senior creditors will lose
money if the bank fails.

MOODY’S downgraded seven German banks yesterday, including the
country’s second-biggest lender Commerzbank, saying that they are
holding risky assets equal to three times their capital base.

GERMANY and EU officials are urgently exploring ways to rescue Spain’s
debt-stricken banks although Madrid has not yet requested assistance and
is resisting being placed under international supervision, European
sources said yesterday.

THE COLLECTIVE pension fund deficit of FTSE 350 companies has risen
threefold to £120bn in just a year as historic final salary schemes continue
to take their toll.

THE RISK of a double dip recession in the US is “very low”, according to billionaire investor Warren Buffett, “unless
events in Europe develop in some way that spill over here big time”. He warned, however, that the Eurozone crisis
remains the biggest threat to the global recovery.

Markets:
YESTERDAY, US stocks jumped giving the S&P 500 its best day since December, as talk of a rescue of Spain’s troubled
banks and hopes for more monetary stimulus sparked a rebound from recent selling.

OVERNIGHT, Asian shares hit one-week highs, on signs that Europe was dealing urgently with Spain’s banking crisis
and that the United States could embark on fresh monetary stimulus.

TODAY, European shares are set to continue their advance, adding to the previous session’s sharp rally, as investors
bet policymakers in Europe could soon unveil measures to prop up troubled Spanish banks and that further monetary
stimulus may be on the way in the United States.

Currencies:
THE DOLLAR was within 0.2% of a one-week low against the euro on bets Fed Chairman Ben Bernanke today may
signal more stimulus is needed to spur a recovery in the world’s largest economy.

Energy:
OIL advanced for a fourth day in New York as policy makers in the US and Europe indicated they may take steps to
boost their economies and Iran signaled it will take a hard line in nuclear talks.

Commodities:
CHINA is set to jolt iron ore off a six-month low after approving an estimated $23bn of steel projects that will use the raw
material produced by mining companies such as Rio Tinto Group and BHP Billiton Ltd. CODELCO, the world’s largest
copper producer, said buyers are delaying metal purchases amid concern that Europe’s debt crisis will slow global
growth.

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