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Financial Focus

Details of a mass bailout for Europe’s banks continued to elude the region’sleaders yesterday, but they are now thought to be mulling stress tests that would result in banks having to raise around 110bn.

France wants the Euro bailout fund to become a bank and borrow from the ECB, boosting its 440bn firepower.

MARKETS:

THE FTSE 100 rose on Friday, erasing the previous session losses, as investors took positions ahead of the European summit. Traders said that much of Fridays gains were down to short covering, with investors keen not to be caught out in the event of a change of sentiment among European leaders.

THE NIKKEI stock average rose more than 1% this morning, shrugging off further yen strength and hits to production from Thailand’s floods, after the weekend yielded signs of progress on a plan to contain the euro zones sovereign debt crisis. The Nikkei was at 8,798.81 at the midday trading break, after losing 0.8% last week. The broader Topix index rose 1% to 751.28.

HONG KONG shares tracked higher today, boosted by strength in mainland financials and commodity stocks after a survey showed that China’s manufacturing sector snapped a three month contraction, alleviating fears of a hard landing for the Chinese economy.

CURRENCIES:

CANADA’S dollar reached its strongest level this month amid growing optimism that EU leaders will make headway in containing the region’s debt crisis, bolstering demand for riskier assets. The Canadian dollar rose for the third straight week in the longest streak since April.

ENERGY:

CHINA’S power station coal price rose to the highest level in three years as power stations and central heating plants built up stocks to meet winter demand. Coal rose 0.6% a metric ton as of yesterday, compared with a week earlier, according to data today from the China Coal transport and Distribution Association. That’s the highest price since October 2008.

COMMODITIES:

HEDGE FUNDS increased bullish bets on commodities by the most since August on mounting optimism that the global economy will avoid another recession, boosting prospects for raw materials demand. The S&P GSCI gauge of 24 commodities has climbed 6.7% so far this month, on track for the biggest monthly advance this year.

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