Video

Financial market turmoil, a slowing U.S. economy and soaring commodity prices will curb euro zone growth more than expected this year and next, while inflation will stay above the ECB target. That's the view of the European Commission. In its twice-yearly economic forecasts, the EC said growth in countries sharing the euro would slow to 1.7 percent this year from 2.6 percent in 2007. Inflation is tipped to accelerate to 3.2 percent in the whole of 2008 - up from just over 2 percent in 2007. Price growth is mainly being fuelled by a surge in food and oil prices which is also dampening consumer demand. But, an inflation slowdown in five German states in April shows it's not all bad news in the euro zone, and that means less chance of a rise in interest rates by the European Central Bank. The numbers from Germany offer some of the first insights into prices in the broader euro zone, where annual inflation accelerated to a record high of 3.6 percent in March. The better news on inflation trimmed some of the euro's gains against the dollar. However, inflation pressures still lurk in the form of record oil prices. Oil prices headed toward $120 a barrel before easing in afternoon trade. Supply concerns were the main focus as workers pushed ahead with a two-day strike that shut a major pipeline supplying about half of Britain's oil and Exxon Mobil shut nearly all of its Nigerian production. European stocks rose for the fourth straight session, led by banks on renewed optimism that the worst of the credit crisis is over. The banking sector put in a better performance after recent weakness, led by Spain's BBVA and American Express. Matt Cowan, Reuters COMPANIES MENTIONED: SYMBOLS: