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These are stories Report on Business is following Wednesday, June 29. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.

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Markets climb, but don't be fooled Investors are in an optimistic mood this morning, expecting Greece's Parliament will vote to pass a new round of austerity measures that include severe cuts to the public sector, tax hikes and asset sales.

Tokyo's benchmark Nikke climbed 1.5 per cent, while Hong Kong's Hang Seng was little changed. In Europe, London's FTSE 100, Germany's DAX and the Paris CAC 40 were up by between 1.5 per cent and 1.9 per cent by about 7:15 a.m. ET.

Dow Jones industrial average and S&P 500 futures also rose.

But, noted Scotia Capital, today's vote is the first of several hurdles, and investors should not be fooled by a possible "sucker's rally."

Protests continue in Greece against the austerity measures as Prime Minister George Papandreou tries to get approval for the measures tied to the country's bailout. No approval, no more money.

"With all eyes on Athens - but with no definitive time for the vote to actually come in - traders have been riding the recent wave of confidence on the broad-based assumption that the austerity vote will be passed," said Yusuf Heusen, senior sales trader at IG Index.

"Quite what this actually means, however, when there are clear signs that the population won't buy into the measures required remains to be seen, making this rally look awfully fragile and potentially just increasing the size of any resulting selloff that we will presumably witness at some point."

Markets are worried about the possibility of a credit default, though fears have eased since France said its banks would agree to roll over some debt, sparking hope that other European institutions will agree to the same plan.

But Europe's debt crisis has raged for more than a year now, and it would be unwise to believe that it's going to end any time soon.

"The problems will not end with the 'yes' vote the markets expect to get later today," said CMC Markets analyst Michael Hewson.

"One only has to look at the scenes outside the Parliament building in Athens to know that there is a long way to go with some opinion polls saying that over 70 per cent of Greeks are opposed to the measures," Mr. Hewson said in a research note.

"There is also the small matter of the ratings agencies who have gone on the record as saying that any type of reorganizing, restructuring of debt would technically be considered a default event," he added.

"There is also a school of thought that politicians could well exert undue pressure on the agencies, which would be ironic given that the same agencies were being roundly criticized by governments two to three years ago for not being stringent enough with respect to their ratings of subprime debt. It is unlikely that they will want to be accused of being caught out again, but who knows what political pressure might be brought to bear."

Today's vote is the first, and would be followed tomorrow with another that would put the legislation into effect. Then, on Sunday, finance ministers of the euro zone meet to decided whether to release the next tranche of money.

"Then the fun begins," said Derek Holt and Karen Cordes Woods of Scotia Capital.

"What happens from that point forward is still marked by enormous uncertainty. How to address Greece's longer run funding requirements within the confines of an economy that stands no hope of doing it on its own through economic and revenue growth, and how to do so without triggering a default stamp is proving to be enormously complex."

Inflation rate rises Inflation is getting awfully hot in Canada, hitting an eight-year high, though it's largely driven by high prices at the pump.

Canada's annual inflation rate climbed in May to 3.7 per cent, uncomfortably above the Bank of Canada's target.

The so-called core rate, which excludes volatile items and guides the central bank's monetary policy, came it at 1.8 per cent, Statistics Canada said today. The overall rate was up from 3.3 per cent in April. Month over month, prices climbed 0.7 per cent, though on a seasonally adjusted they rose 0.2 per cent.

"Markets will be rethinking their very dovish view on Canadian interest rates, as CPI came in hotter than expected in May," said Avery Shenfeld, chief economist at CIBC World Markets in Toronto.

Energy prices spiked 16.6 per cent from a year earlier, the federal agency said. Strip out gas, and prices rose 2.4 per cent over the 12 months.

Before today's report, economists had believed the Bank of Canada wouldn't hike interest rates again until the fall at the earliest, and possibly even next year.

"Core inflation trends are gathering momentum and are now running quite a bit ahead of the Bank of Canada's latest forecast," said BMO Nesbitt Burns economist Robert Kavcic. "This could reopen the debate about a rate hike by the end of the year."

Still, the inflation rate is expected to fall again, and economists believe price pressures will ease. And remember, gasoline prices are a big factor here.

"Canada's headline rate of inflation has likely hit its high-water mark and should soon begin to head lower," said deputy chief economist Derek Burleton of Toronto Dominion Bank. "... All said, look for headline CPI inflation to fall back to below 3 per cent during the second half of 2011 and for core price inflation to stay below the Bank of Canada's inflation target of 2 per cent."

From today's Report on Business

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 27/03/24 4:00pm EDT.

SymbolName% changeLast
CM-N
Canadian Imperial Bank of Commerce
-0.46%50.07
CM-T
Canadian Imperial Bank of Commerce
-0.66%67.9

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