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Midweek financial focus

• World bank cuts growth prediction in its twice-yearly report
• Eurozone trade figures offer a glimmer of hope
• Mexico and Indonesia may overtake UK’s GDP by 2050
• UK inflation remains above 2% target in December
• Germany joins in with Eurozone economic contraction
• US retail sales up in December
• Indian growth rebound limited by inflation in 2013
• China defends export data after economists’ doubt
• S&P 500 companies falling short of Q4 earnings
• Overnight markets down – European stocks to open mixed
• Europe under threat from strengthening currency
• Oil trading down on high stockpiles
• Gold heading for two-week high

The World Bank cut its projection for economic growth in the US, by
0.5% to 1.9% in its twice-yearly report yesterday. It reduced its forecast
for Japan to 0.8% from 1.5%, predicted a second year of contraction in
the Eurozone and lowered its estimates for emerging markets led by
Brazil, India and Mexico. China was cut to 8.4% from 8.6%.

A long run of gloomy Eurozone data was yesterday broken by figures
showing the currency bloc had expanded its trade surplus during
November. The beleaguered currency area sold €13.7bn more to the
rest of the world than it bought, Eurostat revealed, beating the €9.3bn
surplus it achieved in October.

The UK is on a slow economic slide that will see it fall out of the world’s
10 biggest economies by 2050, PwC predicted this morning. This drop
will see the UK eclipsed by Mexico and Indonesia as the populous
developing countries overtake more stifled wealthy nations.

Consumer price inflation in the UK remained stuck above the BoE target
of 2% in December. Headline inflation came in at 2.7%, marking the 37th
straight month of above-target price growth.

The German economy contracted in the final quarter of 2012, official figures estimated yesterday, dealing a body blow to
the Eurozone as its biggest and strongest member contributed to the recession afflicting the currency area.

The US economy enjoyed a healthy climb in retail sales during the all-important December period, official data revealed
yesterday. Retail and food services sales in December were $415.7bn, up 4.7% on the year, and up 0.5% on the month
– even correcting for seasonal variations.

Indian economic growth may rebound in 2013 while falling short of the government’s 8% target, as inflation risks limit the
extent interest rates can be lowered to spur consumption and investment.

China’s customs administration said every dollar of trade is documented, defending the quality of export data that
analysts at UBS AG and Australia & New Zealand banking group may fail to capture the true picture.

Markets:
Of the 6% of S&P 500 companies to have reported earnings to date this year, 25% have missed fourth-quarter earnings
forecasts and 29% have undershot on revenues, according to Thomson Reuters StarMine data. In Europe, the reporting
season kicks off in earnest next week.

Overnight, Asian stocks fell, with the regional benchmark index heading for its first loss in three days, amid signs markets
are overbought. The Nikkei 225 Stock Average slid by the most in eight months.
Today, European stocks are expected to open mixed, with global growth concerns and uncertainty about the strength of
Q4 earnings keeping key indexes below last week’s multimonth peaks.

Currencies:
The euro’s 8.4% gain against USD in the past six months is posing a fresh threat to the European economy just as it
shows signs of escaping the debt crisis, said Jean-Claude Juncker, who leads the group of euro-area finance ministers.

Energy:
Oil traded near the lowest level in almost a week in New York after US crude stockpiles increased and the World Bank
cut its economic growth forecasts.

Commodities:
Gold advanced for a third day toward a two-week high as expectations that global policy makers will need to stimulate
growth boosted demand for a store of value.

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