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Financial Focus

THE US trade deficit narrowed in May, according to data released
yesterday by the Commerce Department. The trade deficit stood at
$48.7bn in May, compared to the revised April figure of $50.6bn. This
came from exports that inched up $0.4bn, to $183.1bn, and imports that
shrunk $1.6bn to $233.3bn.

ALMOST every European bank, which was dangerously undercapitalised
in February, has now met regulatory targets, the European Banking
Authority (EBA) revealed yesterday.

THOUSANDS of protesting miners clashed with police in Madrid yesterday
as Prime Minister Mariano Rajoy announced a fresh round of spending
cuts and tax rises, amounting to €65bn, designed to shore up the
government’s troubled financial position.

THE BANK of Korea today unexpectedly lowered its benchmark borrowing
rate, following easing by the European Central Bank, People’s Bank of
China and the Bank of England last week. Meanwhile, the Bank of Japan
surprised everyone by increasing its asset purchase programme for a third
time this year, while cutting the size of a credit loan facility.

BANKING giant HSBC plans to “acknowledge and apologise” for failing to
spot and deal with money laundering within the bank during a US Senate
panel hearing next week, according to an internal memo sent by its chief
executive. Analysts believe the fine will be as high as $1bn.

Markets:
EMERGING market growth slowed in the second quarter, due to reduced
manufacturing growth, according to HSBC’s Emerging Market Index released yesterday. Within the Bric, Brazil and China
reported declines in new export orders, compared to rises for India, Russia, Turkey and South Korea. Similarly Brazil
recorded the slowest growth in services for three quarters.

YESTERDAY, the US Fed’s minutes revealed that senior officials had considered voting form more quantitative easing
last month, but this wasn’t enough to encourage investors, as stocks in New York fell and the dollar hit a two-year high
against the Euro.

OVERNIGHT, Asian stocks fell for a sixth day on news of an unexpected interest-rate cut in South Korea, worse than estimated
Australian jobs data, adding to negative sentiment about the Fed minutes which showed little sign of
aggressive easing plans. Markets are also waiting for Chinese GDP data on Friday.

TODAY, European shares are set to fall, mirroring losses on Wall Street and in Asia, with investors cutting their exposure
to riskier assets following uncertainty over whether the US Federal Reserve would launch more stimulus measures.

Currencies:
THE YEN maintained its advance versus the dollar and euro even after the Bank of Japan unexpectedly expanded its
asset-purchase fund, its main monetary policy tool.

Energy:
OIL traded near the highest close in two days in New York after U.S. stockpiles fell and refinery utilization rose,
countering concern that global fuel demand will falter as manufacturing stagnates in Europe.

Commodities:
GOLD will climb to a record by yearend as the global economy slows from the weight of too much debt, says Eric Sprott,
the founder and chairman of Canadian fund manager Sprott Inc. Sprott’s company manages funds investing mainly in
gold, silver, and precious metals equities. He expects bullion will rise as investors seek the safest assets while
governments spend to stimulate their economies, increasing chances that inflation will accelerate.

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