INFLATION

World stock markets are in for their most modest annual gains for years in 2008 thanks to the global credit crunch and an evolving economic slowdown, Reuters polls showed on Monday.

Global stocks erased early losses on Monday, dollar money market tensions eased and the U.S. currency held near one-month highs against the yen ahead of an expected Federal Reserve interest rate cut this week.

Another U.S. Federal Reserve interest rate cut this week is a foregone conclusion as far as financial markets are concerned, but a heaping helping of global inflation data may leave a sour aftertaste. foregone conclusion as far as financial markets are concerned, but a heaping helping of global inflation data may leave a sour aftertaste. The Fed is widely expected to follow the central banks of Canada and England with a quarter-percentage-point reduction in the benchmark federal funds rate on Tuesday.

China's bid to end fuel shortages only a temporary cap on the problem

Employers added 94,000 jobs in November, the Labor Department said on Friday in a report showing a slowdown in job creation in recent months that raises chances for a modest cut in interest rates next week. Analysts said continued gains in hiring showed the economy was not at immediate risk of crumbling onto recession but another report said consumers' moods grew darker in December.

The euro rose against the yen and dollar on Thursday after the head of the European Central Bank, Jean Claude Trichet, reduced speculation of a rate cut, warning about inflationary pressure.

The euro rose against the dollar and the yen on Thursday after the European Central Bank left interest rates on hold but President Jean-Claude Trichet warned of strong upward pressure on inflation.

The board of the Reserve Bank of Australia decided to keep the interest rate at the same percentage of 6.75, but it has concerns regarding inflation.

Wall Street's rebound from its first full-fledged correction in more than four years could continue this week if investors believe a plan to keep millions of Americans from losing their homes can work.

Consumer spending inched up by an unexpectedly small 0.2 percent last month and construction spending tumbled, according to reports on Friday that heightened concerns on the health of the economy.

Gold firmed in narrow ranges on Friday, struggling to recapture the key $800 mark and taking refuge from sharp swings in oil and currency markets.

The yen fell broadly on Friday and high-yielders gained after comments by Federal Reserve Chairman Ben Bernanke cemented expectations of easier monetary policy, which may help the U.S. economy to avoid a recession.

Federal Reserve Chairman Ben Bernanke said on Thursday a resurgence in financial strains in recent weeks had dimmed the outlook for the U.S. economy, signaling an openness to lowering interest rates again. He said the Fed will have to remain exceptionally alert and flexible.

Global stocks rallied on Thursday after strong Wall Street gains in the previous session, as the prospect of Federal Reserve interest rate cuts boosted faith in the U.S. economy and encouraged investors to take on risk again.

Economic growth slowed in October and the first half of November as a glut of homes for sale pushed home prices down and tighter credit took some would-be buyers out of the market, the Federal Reserve said on Wednesday.

Gold slid under the $800 mark in increasingly volatile conditions on Wednesday, as softer oil prices and a firmer dollar against the euro dented the metal's wider appeal for investors.

Former Federal Reserve Chairman Alan Greenspan said on Friday that chances of a U.S. recession would be more than 50 percent if it were not for the remarkable flexibility of the economy.

Gold gained more than $6 an ounce on Friday as bargain hunting intensified after the U.S. dollar tumbled to record lows against the euro on expectations the Federal Reserve will slash interest rates next month.

U.S. oil surged to a nominal all-time high of $99.29 a barrel on November 21, boosting the annual average price to $69.97.

Oil held above $98 a barrel on Wednesday, after closing in on the $100 milestone as the dollar hit new lows and cold weather in the United States, the world's biggest fuel consumer, stirred anxiety over winter supplies.

The Federal Reserve was unsure last month whether lower borrowing costs were needed to cushion the U.S. economy from a housing slump and credit market woes but, in a close call, decided to cut interest rates as an insurance policy, minutes of the meeting released on Tuesday show.