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Financial Focus

SPAIN’S government bowed to the inevitable over the weekend and asked
the Eurozone for a bailout to recapitalise its devastated banks. The Euro
group backed the request, praising the government’s efforts to reform the
economy, and offering up to €100bn (£81bn) from the Eurozone’s bailout

A REPORT that German Chancellor Angela Merkel is not serious about
implementing a European financial transaction tax threatens to undermine
an initial deal struck last week with the opposition over the EU’s planned
fiscal pact.

GREECE and Ireland could demand changes to their own bailout deals, it
emerged yesterday, after Spain was given much more lenient terms on the
terms of its bank rescue. The two smaller countries, as well as Spain’s
neighbour Portugal, faced tough constraints on government spending and
taxation before they were able to access bailout cash.

ITALY is still at risk and could require a bailout in the near future,
economists warned yesterday, as its economy remains sluggish and
government borrowing costs are still dangerously high. Ten-year borrowing
costs stood at 5.77% when markets closed on Friday, below the peaks of
above seven per cent seen in December and January, but still far above the
3.7% seen in late 2010.

BRITAIN’S BANKING regulator could be handed new powers to enforce government recommendations on how the country’s
largest banks should ring fence their retail and investment operations. UK finance minister George Osborne will signal a more
accommodating tone on regulation at an annual dinner for bankers this Thursday, hosted by The City of London, where he is
due to outline how the government will implement the Vickers report.

ASIAN stocks rallied as investors cheered Europe’s bailout of Spain’s troubled banks and a raft of Chinese data offering a ray of
economic hope. Investors were relieved after Eurozone finance ministers agreed on loans to help Spain’s banks while China’s
exports grew faster than expected while inflation slowed. Figures at the weekend showed exports rose 15.3% in May from a
year earlier while inflation receded to a two-year low of 3%.

U.S. STOCK futures rose after Chinese exports climbed 15.3% from a year earlier in May. Other reports showed industrial
output and retail sales in China trailed forecasts, signalling last week’s cut in interest rates was aimed at countering a domestic
slowdown. The nation announced the first cut in rates in more than three years on June the 7th.

THE EURO rose against most of its major counterparts after European governments agreed to provide Spain with a bailout
loan. The 17-nation currency climbed to a two-week high after Spain asked for as much as 100 billion euros to save its banking
system, making it the fourth member in the currency bloc to seek a rescue. The dollar and yen fell on decreased demand for
refuge assets as Asian shares rallied.

OIL ROSE the most in more than five months in New York on speculation fuel demand will increase after Spain requested a
European bailout to shore up its banks and China’s imports of crude climbed to a record. Futures advanced as much as 3%, the
biggest gain since January the 3rd.

SPECULATORS reduced wagers on a rally in agricultural prices to a five-month low just as returns from crops and livestock
beat most other commodities on concern that parched fields from Iowa to Russia will curb supply.

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