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Friday financial focus

-UK: Cheap funds for lenders to help SMEs
-Germany: Merkel breaks rank over ECB interest rates
-Spain: Unemployment hits record highs
-Spain: PM likely to turn away from austerity
-Currencies: Yen gains after BoJ maintains stance
-Energy: Crude’s slip might be short lived
-Commodities: Gold headed for best week since October 2011
-Property: UK homeowner confidence surges
Focus on: Japan’s challenge to overcome deflation

Asia Overnight: Hong Kong shares surge
Hong Kong shares rose to their highest since mid-March on Friday,
stretching gains for the week, as a recovery in physical commodity
prices helped magnify earnings-driven strength in Chinese financial
and energy majors. Mainland China markets ended a choppy morning
session slightly lower as bourse volumes stayed anemic, heading for a
fourth weekly loss in five ahead of an extended Labour Day holiday.

China stock markets will be closed April 29 through May 1.

Today’s Markets: European markets seen trimming gains
European shares are set to fall today following more than 4% gains
during a five-session rally, with investors seen trimming stocks after
some disappointing company earnings and before the release of US
growth data. About two weeks ago, first-quarter US GDP forecasts
topped a 4% rate, but have been slashed to 3% after a raft of weak
March data.

Markets Yesterday: S&P 500 nears record before dropping back
US stocks rose on Thursday, lifted by stronger-than-expected
earnings and a large drop in weekly jobless claims. The S&P 500, up
for five straight sessions, traded within a point of its record closing
high before shedding about half of the day’s gains.

UK: Hopes raised that recovery is in sight
Hopes were raised yesterday that the UK could be nearing partial
recovery mode at last, after official estimates revealed the economy
grew unexpectedly quickly in the first three months of the year.
Economists hope the 0.3% expansion means fears of a triple-dip
recession can be banished for good. The all-important services sector
saw output grow 0.6 per cent during the quarter and 1.5% on the year,
meaning the largest sector of the economy is now bigger than it was at
its previous peak in 2008. Many no longer think the Bank of England
will expand quantitative easing, as the economy could grow without
the extra stimulus.

UK: Cheap funds for lenders to help SMEs
Banks are being offered cheap funding for another year in a renewed
drive to boost lending to the private sector and get the economy
moving. The funding for lending scheme (FLS) was launched in August and was expected to run for 18 months. But the
Bank of England and the government are worried that lending to small firms has still not picked up enough and so have
extended the scheme and tweaked it to increase incentives to help SMEs. On top of that, banks’ lending to other credit
providers like asset finance firms and invoice finance firms – those typically used by small firms – will also be included,
again potentially aiding SMEs.

Germany: Merkel breaks rank over ECB interest rates
German Chancellor Angela Merkel broke ranks yesterday to deliver an outspoken critique of ECB interest rate policy,
hinting rates would have to increase if policymakers looked at Germany alone. The comments, which are out of keeping
with the traditional neutrality of German leaders on monetary policy, come ahead of an expected cut in interest rates from
the ECB next week. “As the Eurozone recession deepens, the downturn in Germany accelerates, credit conditions
remain tight and inflation is falling, the European Central Bank is under growing pressure to take action,” said economist
Tomas Holinka from Moody’s Analytics. “We expect the ECB to cut its policy rate by 0.25 percentage points to 0.5 per
cent next week.”

Spain: Unemployment hits record highs
Spain’s unemployment rate hit a new record of 27.2% in the first quarter of 2012, according to today’s data from the
National Statistics Institute. This equates to 6.2 million people now out of work, a rise from the 26% for the last quarter of
2012. The news contrasts to Spanish Prime Minister Mariano Rajoy’s predictions earlier this month that Spain was on its
way to returning to growth. Youth unemployment is particularly high in Spain, reaching a new record of 57.2%, according
to today’s labour market figures. This is compared to 55.1% in the last quarter of 2012. 1.9 million households now have
all of their members out of work.

Spain: PM likely to turn away from austerity
When he took over 16 months ago, Prime Minister Mariano Rajoy attacked bloated budget deficits by cutting spending
and raising taxes. The deficit shrunk under this treatment, yet today, the government is expected to lay out an agenda
that tilts away from austerity—putting new priority on spurring growth. Behind the move is a continued slide in Spain’s
fortunes. Its jobless rate leapt a full point Thursday, to a depression-like 27.2%, and the central bank sees the economy
shrinking 1.5% this year.

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