US Markets - Solid earnings and speculation about buy-outs of financial groups pushed US stocks into record territory this week as the leading indices recouped all the losses from the slump that began in late February.

Boosted by bullish earnings updates from Caterpillar and Honeywell on Friday, the Dow Jones Industrial Average closed at a record level for a third successive day, climbing 1.2% to 12,961.98.

The S&P 500 index broke through its high for the year reached before the plunge in equities two months ago, rising 0.9% to 1,484.35 on Friday to stand 2.2% up this week.

The technology-led Nasdaq Composite rose 1.3% this week to 2,526.39.

While the advance gathered pace on Friday, the rally earlier in the week was driven by a relatively narrow base of stocks. Blue chips had the best of the gains: the Dow Jones advanced 2.8% this week while the Russell 2000 index of small companies rose just 1.2%.

Google led the way up after beating analysts’ expectations with a sharp rise in profits on the back of strong search engine revenues. Its shares rose 2.3% to $482.48.

This rise was in stark contrast to Yahoo, which slid 12.6% to $27.46 this week after the introduction of Panama, its new online advertising system, failed to stem the deterioration in profits and sales. Caterpillar, a Dow component, surged 4.7% to $71.82 on Friday after the heavy machinery maker reported profits in excess of analysts’ estimates and raised its earnings forecasts.

Shares in Honeywell International rose 4.8% to $51.40 on Friday after the industrial conglomerate raised its earnings forecasts for the year and beat Wall Street profit estimates.

The financial sector came in from the cold this week, with the S&P Financial index up 3.9% to break past its 50-day moving average and stand in positive territory for the year.

The rise came amid a burst of takeover speculation after a $25bn agreed buy-out of Sallie Mae, the student loan group, by a JC Flowers-led consortium that sent shares in Sallie Mae up 15.5% to $54 this week.

The groundbreaking deal, which is structured to make it unnecessary for Sallie Mae to hold its own capital, turned attention to financial groups that were previously considered improbable buy-out targets. Foremost among those was Countrywide Financial, the biggest home lender, which jumped 11.1% to $37.36.

Speculation about the identity of a potential buyer has centred on Merrill Lynch, which has made bullish comments about the subprime mortgage market.

Merrill rose 6.7% to $92.02 this week after reporting a four-fold rise in profits.

In the latest example of the growing appetite for financial deals, H&R Block agreed to sell Option One Mortgage, its subprime mortgage unit, to a company affiliated with Cerberus Capital Management, the private equity group. Shares in H&R Block rose 3.3% to $22.56 on Friday.

Intel made big gains this week, rising 8.3% to $21.16, as the chipmaker raised its revenue forecasts after a successful overhaul of its product line.

Rival AMD fared less well, easing 0.8% to $14.16 on Friday after what Robert Rivet, chief executive, described as a “disappointing and unacceptable” first quarter, with lower sales and deteriorating margins.

The rally in railway stocks gathered steam as TCI, the activist hedge fund, built a stake in CSX, highlighting the potential for takeovers and asset sales in this cash-generative sector.

Shares in CSX jumped 6.1% to $4504.

Atticus, a hedge fund that has worked with TCI in the past, already holds big stakes in railway groups, including Union Pacific, which rose 6.8% this week to $117.21.

Homebuilders bounced off their lows for the year as fears eased about the severity of the housing market downturn. The S&P Homebuilders index jumped 8.6% while DR Horton rose 8.9% to $23.39.

European Markets - It was a mainly positive week for European markets with most major markets closing out the week higher - but once again much to do with M & A 'chatter' and on merger talks in the banking sector particularly.

So let's start with Germany where in Frankfurt shares closed higher led by financial stocks benefiting from takeover rumours in the sector and with heavyweight Siemens making strong gains following the resignation of its supervisory board chairman Heinrich von Pierer.

The DAX closed 99.81 points or 1.38% higher at 7,342.54, after trading between a low of 7,337.66 and a high of 7,355.26 in today's session.

The MDAX rose 116.44 points or 1.10% to 10,658.16, while the TecDAX added 13.73 points or 1.56% to 893.94. DAX futures added 83.50 points or 1.14% to 7,387.50, while bund futures stood flat at 113.74.

Deutsche Bank led blue chips higher, gaining 4.52 Eur or 4.18% to 112.64, after rumours of a tie-up between Unicredito Italiano and French banking giant Societe Generale picked up pace affecting valuations across the sector.

Other financial stocks were also higher on the Unicredito/Societe Generale speculation, with Commerzbank adding 1.6 Eur or 3.62% to 36.03 and Allianz rising 3.47 Eur or 2.14% to 165.50.

Shortly after the German markets closed, Societe General said, however, that no merger talks with Unicredito are currently underway.

Siemens ascended 3.47 Eur or 2.14% to 90.35 after supervisory board chairman Heinrich von Pierer said he will step down and on a media report that the electronics giant has reached second-quarter margin targets in all divisions.

Frankfurter Allgemeine Zeitung reported that according to unnamed sources Siemens reached all divisional targets, beating most analysts' expectations for its second quarter results.

SAP gained 0.77 Eur or 2.13% to 36.87, after first-quarter figures released today came in slightly below market expectations but showed strong sales growth that bolstered views that the software maker will meet full-year targets.

Meanwhile, RWE dropped to the bottom of the index losing 1.23 Eur or 1.55% to 78.25.

Infineon declined 0.11 Eur or 0.95% to 11.44. Traders said its shares were under pressure after peer Advanced Micro Devices Inc said yesterday that it lost 611  million usd in the first three months of the year as it was dragged down by sharply lower microprocessor unit sales and selling prices.

Deutsche Post lost 0.22 Eur or 0.94% to 23.13 as traders spoke of vague rumours of a large placement in the postal carrier.

Volkswagen was 0.67 Eur or 0.58% lower at 114.45, largely correcting from yesterday's gains, dealers said.

Adidas lost 0.34 Eur or 0.76% to 44.13.

MDAX-listed IWKA added 1.07 Eur or 4.73% to 23.71 after the machine and factory specialist announced the conclusion of the sale of its packing unit for 255  million Eur, of which IWKA netted 195  million.

Into France now where in Paris Share prices closed higher also mainly driven by M&A rumours surrounding Societe Generale and Vallourec, and sharp gains on Wall Street sparked by higher-than-expected earnings reports.

The CAC-40 index finished up 109.86 points or 1.88% at 5,938.90 on high volume of 11.1  billion Eur.

Among CAC-40 stocks, 35 closed higher, 1 was unchanged and 4 closed lower. On the Matif, May CAC-40 futures were trading up 101.5 or 1.75% at 5,889.5.

On the broader indices, the SBF-80 index closed up 79.75 or 1.09% at 7,381.56 while the SBF-120 was up 75.48 or 1.76% at 4,353.16.

As mentioned, banking group Societe Generale was in the spotlight throughout the day, amid speculation of a takeover bid from Italy's Unicredito, and rumours of a possible counterbid from BNP Paribas.

Societe Generale shares closed up 11.22 or 7.74% at 156.09 after jumping as high as 162.00.

Talk of a Unicredito move for SocGen intensified after a report in German newspaper Handelsblatt this morning claiming Unicredito CEO Alessandro Profumo and his SocGen counterpart Daniel Bouton are currently holding talks.

BNP Paribas also closed up 3.22 or 3.87% at 86.45, buoyed by the rumours and by reports it might reinforce its partnership with Banca CR Firenze and increase its stake in the bank to at least 10.0% from 6.5%.

The rumours were later dampened slightly by a statement from Banca Cassa di Risparmio di Firenze's parent, the banking foundation Ente Cassa di Risparmio di Firenze, which said it views 'positively' a merger of the Florence-based bank with the much larger group Intesa Sanpaolo SpA.

Other banking shares were lifted by the speculation, with Dexia ending up 1.08 or 4.71% at 24.00 and Credit Agricole finishing 0.71 or 2.35% higher at 30.98.

Vallourec, meanwhile, led the gains on the CAC-40, closing up 17.37 or 9.16% at 207.00 after a Goldman Sachs note reignited speculation about a possible move by Arcelor-Mittal for the French tube maker.

Arcelor-Mittal shares closed up 1.82 or 4.69% at 40.66.

Another major climber was Euronext NV, which closed up 5.12 or 5.77% at 93.80.

Also on the second line, chemicals group Rhodia finished up 0.15 or 5.19% at 3.04 as it continued to benefit from positive reaction to its 1  billion Eur refinancing plan.

Elsewhere, cosmetics group Clarins finished up 0.95 or 1.54% at 62.56, reversing earlier losses after its first-quarter sales missed consensus on a strong Euro and weak US perfume operations.

Among the few blue-chip fallers, Peugeot shed 0.65 or 1.12% to 57.42 after a strong rally in recent sessions.

Rival car maker Renault rose 2.43 or 2.66% to end at 94.34.

Alcatel-Lucent was down 0.06 or 0.64% at 9.29.

Bear Stearns analyst Philip Cusick said in a note to European investors he expects Paris-based Alcatel-Lucent to post a 'challenging' first quarter, while other analysts expect seasonal weakness for networking and communications equipment companies as a whole.

Eiffage was up 1.17 or 1.11% at 107.01 the day after Sacyr Vallehermoso SA launched an all-share bid for the French construction group.

In Brussels Belgian stocks also closer firmer with the Bel 20 closing at 4,630 - up 1.76% on the day.

Pharmaceutical group UCB rose 0.70 Eur or 1.65% to 43.05, after its Keppra treatment for partial onset epileptic seizures in children from one month to less than four years of age showed 'positive' results in a phase three study.

Mobistar climbed 0.85 Eur or 1.34% to 64.25, following the publication of its first quarter sales last night which pleased the market.

Mobistar said its first quarter sales rose 2.2% to 372.1  million Eur from 364.1  million a year earlier, towards the top end of the 357.0-374.7 range of expectations.

Elsewhere, healthcare group Omega Pharma was up 0.42 Eur or 0.70% analysts were upbeat about the performance of its professional healthcare unit Arseus in the group's first quarter results.

Omega Pharma posted first quarter sales yesterday of 275.9 Eur against 245.6  million for the first quarter of 2006, in line with analysts' expectations of 275.0-279.0  million Eur.

InBev rose 0.40 Eur or 0.71% to 57.02, with analysts bullish on the prospect that its Companhia de Bebidas das Americas (AmBev) unit will relaunch its offer to acquire the 8.8% remaining shares it does not already own in its Quilmes Industrial SA (Quinsa).

To The Netherlands next where Amsterdam shares closed higher in Amsterdam, boosted by sharp gains on Wall Street and tracking positive European markets amid continued M&A talk, with Arcelor Mittal, TNT and heavyweight financials leading AEX gainers.

The AEX closed up 7.70 points or 1.46% at 536.36 after opening at 531.19 and trading in a range of 530.93-539.08.

Arcelor Mittal led gainers, putting on 4.69% to 40.65 Eur, amid news that its unit Mittal Steel USA unit has started exporting steel from the US.

TNT outperformed, rising 2.89% to 33.82 Eur as parliament indicated that a suggested margin cap on part of its revenues would not go ahead as part the looming liberalisation of the postal sector.

After confirmation last night that ABN Amro will meet next week with a consortium of banks attempting to rival Barclays in takeover talks, the bank's shares finished up 1.48% to 36.29.

Among other financials, ING gained 1.94% to 34.24 amid news the banking group was rated 'AA-' with a stable outlook by Fitch.

Aegon gained 1.97% to 15.52 and Fortis added 1.86% at 34.45.

Staffing shares were up after both Vedior and USG People were upgraded to 'add' from 'hold' at Petercam. Vedior rose 2.69% to 17.56.

USG People -- which was also upgraded to 'buy' from 'add' by SNS Securities -- climbed 3.37% to 33.10.

Blue chip peer Randstad also put on 1.07% to 60.96 despite being downgraded to 'add' from 'buy' at SNS Securities.

Rodamco gained 2.49% to 111.87 Eur amid news its largest shareholder PGGM has commited to vote as a shareholder in both Unibail and Rodamco in favour of their merger.

Midcap peer Corio put on 2.32% to 71.32.

Akzo Nobel closed up 0.28% at 57.45, down from an intraday high of 58.10, after saying it agreed to acquire protective coatings company Ceilcote for 'close to 12  million Eur'.

Hagemeyer was the chief AEX decliner, dropping 2.68% to 3.63 after the company's in-line first-quarter sales report showed disappointing organic growth at its US and UK activities, outweighing an upgrade to 'hold' from 'reduce' by Petercam.

BAM led midcap gainers, adding 3.78% at 19.50 Eur.

Vopak rose 1.56% to 43.50 on news it will expand storage capacity in Singapore and said the sale of its stake in VOTG Tanktainer would result in a second-quarter book profit of 6.5  million Eur.

In Zurich Swiss Share prices closed sharply higher across the board and closed at a record high after breaching the 9,400 earlier today for the first time, tracking steep US gains, and led by financial stocks.

The Swiss Market Index closed 142.96 points or 1.5% higher at 9,399.75 and the Swiss Performance Index finished 110.35 points or 1.5% higher at 7,558.24.

The Euro rose against the franc to 1.6424 SFr, as did the Dollar, to 1.2079 SFr.

Share prices staged a broad-based technical rebound and temporarily reached a new all-time high at 9,417.13, lifted by sharp gains in the US and on other European markets with some volatility given today's options expiry.

Financials were the market's best performers, with UBS the top climber, up 3.25 or 4.3% at 78.25 SFr on rumours that a major US hedge fun is positioning itself within the bank.

Runner-up was Credit Suisse, up 2.7 SFr or 3.0% at 92.2, helped by a report in BusinessWeek saying the bank is undervalued.

Other major gainers included Swatch, up 1.7 SFr or 2.5% at 343 SFr, and Givaudan, up 23 SFr or 2.0% at 1,170 SFr.

Another notable gainer was ABB, up 0.40 SFr or 1.8% at 22.65, continuing its recent positive trend ahead of next week's release of first-quarter earnings, likely to be solid.

Swiss Re was also in focus, up 1.80 SFr or 1.5% at 118.5 SFr. According to a WSJ report, the reinsurer is expected to announce a deal with Friends Provident to manage longevity risk for 1.7  billion stg of annuities.

Peer Zurich Financial gaomed 2.75 SFr at 356.5 SFr.

Among pharmaceutical stocks, Novartis gained 0.60 SFr at 69.55, ahead of its first-quarter earnings release Monday.

The group is expected to report a mixed set of first-quarter results with net profit lower due to one-time charges related to Zelnorm, but sales higher thanks to solid sales growth in the pharma and Sandoz units.

Peer Roche rose 2.90 SFr or 1.3% at 234.40, continuing its recent strong run.

Nestle gained 2.00 SFr at 481.75, with the food company due to report solid first-quarter sales on Monday, with focus on its guidance and raw material prices.

Only three stocks ended in the red and succumbed to profit-taking: top faller was Nobel Biocare, down 6.5 SFr or 1.5% at 427, followed by SGS and Julius Baer, down 6 SFr at 1,565 and down 0.3 SFr at 175.6 SFr respectively.

Outside the SMI, Sulzer surged, up 70 SFr or 4.0% at 1,800 after the trade of a substantial share stake, totaling around 19% of the Swiss engineering group's outstanding share capital, sparked fresh takeover rumours.

Into Scandinavia now and starting this week in Stockholm where Swedish shares closed sharply higher in heavy trade after better-than-expected results from SSAB and the US's Caterpillar helped whet investor appetite ahead of next week's slew of earnings announcements.

The OMX Stockholm index closed up 1.20% at 416.24, and the OMX Stockholm 30 up 1.17% at 1,282.18. Turnover was 39.399  billion SKr.

In total, 201 shares closed higher, with 39 unchanged and 65 lower.

SSAB A closed up 6.49% at 238 SKr bid after the steel company's first quarter profit after financials jumped 38% to 2.147  billion SKr on increased volumes, improved product mix and higher prices. The headline result was well ahead of analysts' forecasts of 1.839  billion SKr, as recorded by SME Direkt.

Sales increased by 15% to 8.780  billion SKr, and was also above SME market forecasts of 8.376  billion.

Blue chip engineering stocks enjoyed a strong session with Atlas Copco A closing up 3.01% at 256.50, SKF B up 3.02% at 153.50, and Sandvik up 1.78% at 128.50.

Ericsson B was the day's clear loser, closing down 2.61% at 26.15 after

Sony Ericsson reported pretax profits of 362  million Eur versus market expectations of 368  million, and sales of 2.925  billion Eur versus expectation of 3.084.

Among telecom operators, TeliaSonera closed down 1.15% at 64.25 and Tele2 B flat at 114.75.

The government and the telecoms regulator are looking into splitting off Sweden's monopoly broadband infrastructure from TeliaSonera, various newspapers reported.

Getinge B closed down 3 SKr or 1.92% at 153, and Husqvarna B up 4.25 SKr or 3.61% at 122, after trading ex-div 2.20 SKr and 2.25 SKr respectively.

SCA B closed down 0.94% at 367.50. The share was downgraded to 'hold' from 'buy' by Deutsche Bank with the price target cut to 390 SKr from 430 on the back of the broker's reduced estimates.

In the banking sector SEB A closed up 4.20% at 248. SEB said its Private Banking division and Norwegian real estate agency Privatmaeklarna has signed a cooperation agreement.

The agreement includes private banking, and wealth management and personal finance advice.

Nordea closed up 2.65% at 116.10. The bank's CEO Christian Claussen said the priority for the bank is organic growth, not acquisitions, Dagens Industri reported.

Swedbank A also closed up 3.68% at 267.50.

Among other shares heavily traded, Hennes & Mauritz B closed up 0.91% at 443, Skanska B up 2.23% at 149.25, Boliden up 2.49% at 164.50, and Swedish Match up 1.02% at 123.75.

To neighbours Denmark now and in Copenhagen shares closed higher led up by FL Smidth after the construction and minerals group announced it has placed a 4.8  billion DKr bid for Canadian group GL&V's global mineral operations.

The OMXC20 index closed 3.11 points higher at 488.29 and the OMXCB Benchmark index gained 3.74 points to 467.79.

The OMXC All Share index was up 3.50 points at 464.02 on turnover of 6.63  billion DKr.

FL Smidth was up 32.00 DKr at 414.00. The group said it will acquire GL&V Process; the global mineral activities of Canada's GL&V, for a sum of 4.8  billion DKr cash on a net debt-free basis.

GL&V's board of director unanimously recommends the deal, FL Smidth said, adding that the acquisition is subject to the approval of 75% of GL&V's shareholders and the attainment of government approvals.

NEurosearch gained 15.00 DKr to 267.00 after Jyske Bank reiterated its 'buy' recommendation for the pharmaceutical company ahead of its first quarter report on Wednesday.

Vestas Wind Systems added 4.00 DKr to 366.00, extending yesterday's upturn. 'There were many buyers in Vestas from the US yesterday after Goldman Sachs published an optimistic report and raised its target price for the group (to 486 DKr from 292 DKr), and the positive sentiment continued Friday.

Genmab was up 7.50 DKr at 371.00 after the pharmaceutical company's chief executive Lisa Drakeman said yesterday that she sees a solid sales potential for new cancer treatment Humax-CD20, analysts said.

Trygvesta added 5.50 DKr to 472.50. The group will offer customers advice on risk management as part of a new industrial insurance concept, Boersen said.

DS Torm gained 1.00 DKr to 389.00. According to Boersen, the group will offer 350 of its employees a bonus and stock option programme to motivate them to stay.

AP Moller Maersk was up 100 DKr at 61,800. Freight rates continued upwards in China due to increased demand for shipping transport, RB Boersen reported.

AP Moller's competitor OOIL posted strong first quarter sales boosted by high demand on Asia-Europe lines, the news agency further said.

TDC was flat at 212.00. Computerworld.dk said the group may be given the unique right to sell Apple's iPhone in Denmark.

Danisco added 0.50 DKr to 438.50. The group's subsidiary Genencor said its new production facility in Wuxi, China, has commenced operations.

Carlsberg shed 1.00 DKr to 600.00. Analyst Natalia Milchakova at Otkritie said Baltika, partly owned by Carlsberg, has a good chance of taking a leadership position on the Siberian beer market, Direkt news agency reported.

Among other shares, Nordea was up 2.50 DKr at 94.00, Danske Bank gained 3.50 DKr to 260.50 and Novo Nordisk shed 2.00 DKr to 557.00.

In Oslo Norwegian Share prices closed higher, led up by oil explorer DNO ASA on talks it could be being stalked as a takeover target, and by Yara International after the fertiliser giant reported strong first-quarter results and gave a good outlook on prices moving forward.

The OSEBX Benchmark index closed 7.07 points up at 471.9 and the OSEAX All Share index firmed 7.6 points to 533.22.

Total turnover amounted to 10.7  billion NKr.

A late session spurt in oil explorer DNO, saw the share surge more than 14% at one point on heavy volumes, on speculation that Norwegian oil giant Statoil was interested in getting control. No-one at the two groups would comment. DNO closed 12.3% up at 12.41 NKr.

Rumours circulated that ABN Amro was buying on behalf of Statoil and according to Oslo brokers ABN bought over 80% of shares traded earlier in the day.

Elsewhere, oil producers and oil service sector companies were underpinned by stronger oil prices, helped by political tension in oil producing nation Nigeria ahead of weekend elections, as well technical factors concerning the expiring of a benchmark futures contract.

Producer Norsk Hydro closed up 1.7% to 204.50 NKr.

Service companies firmed across the board including Petroleum Geo-Services, up 2.5% to 166.50 and Seadrill, which closed 2.2% higher at 100.50 NKr.

Fred Olsen Energy rose 1.5% to 298.50 nrk. Earlier it announced its Dolphin Drilling unit was awarded a 60-day extension to an existing deal for the Borgholm Dolphin accommodation rig, worth 12  million usd.

Among tech stocks, video conferencing equipment maker Tandberg failed to impress with Q1 operating profits - announced after close of trade on Thursday session closed - which exactly met analyst consensus predictions.

The stock, however, closed down 3% on Friday to 129.25, dealers said, on disappointment from investors hoping for a surprise on the upside.

Fertiliser group Yara International surged 3.2% to 171.75 NKr after it reported solid first-quarter numbers.

Rounding off the Nordic arena this week is Finland where Helsinki shares closed higher, with Kesko shining on solid first-quarter earnings, and with Nokia heading the leaderboard.

The OMX Helsinki 25 ended up 1.31% at 3,183.49 and the OMX Helsinki all-share index was 1.42% higher at 10,767.34, with volume a healthy 2.077  billion Eur.

Kesko B was the star performer, finishing up 16.05% to reach a new high of 51.70 Eur, after its first quarter numbers comfortably beat market forecasts, dealers said.

Nokia was up 1.76% at 18.48 Eur, extending yesterday's solid gains inspired by a strong first quarter report, amid a swathe of bullish broker comment.

WestLB and ABN Amro have both upgraded the stock to 'buy', Deutsche Bank has repeated its 'buy' rating, while HSBC has reiterated its 'neutral' stance.

Outokumpu Technology, up 1.22% at 30.80 Eur, also posted solid gains. The latter said it has won orders for grinding technology worth 45  million Eur from firms in Australia, Canada and Kazakhstan.

Among industrials, Rautaruukki K climbed 4.00% to 38.74 Eur after its Swedish steel peer posted stronger-than-expected first quarter results, fuelling optimism ahead of its own numbers due out Wednesday.

Outokumpu ended 1.98% lower at 25.31 Eur, Wartsila B added 1.25% to 48.57 Eur and Cargotec was up 4.88% at 47.09 Eur.

In the paper issues, investors took a more cautious line, with forestry group Stora Enso R dipping 0.93% to 12.73 Eur, UPM-Kymmene was 0.27% lighter at 18.48 Eur and M-real B finished 0.38% lower at 5.27 Eur.

Energy stocks closed mixed, with Fortum slipping 1.26% to 21.87 Eur and Neste Oil 0.61% firmer at 26.19 Eur.

Diving down to the Mediterranean now and starting with Spain where in Madrid Share prices closed at record highs in heavy future-driven trade and as Wall Street soared on strong corporate earnings, with Iberdrola leading gains, while Endesa underperformed.

The IBEX-35 index closed up 259.2 points at 15,080.9, after trading in a range of 14,857-15,136 on turnover of 8.4  billion Eur.

The April future on the IBEX-35 expired at 15,112.0, up from 14,826 Thursday, on turnover of around 12,656 contracts.

Utilities were in demand, with Iberdrola rising 1.83 Eur or 5.00% to 38.43, as core shareholders built up their stakes ahead of the company's capital hike next week, Gas Natural added 1.04 or 2.79% to 38.30 and Union Fenosa closed 0.79 higher at 42.28.

Both Fenosa and Iberdrola report first quarter results next week.

Endesa underperformed its peers, adding 0.02 to 40.35.

Selected constructors were strong, with Ferrovial adding 3.55 or 4.48% to 82.75, Acciona rising 4.05 or 2.42% to 171.40 and FCC gaining 1.50 to 76.75.

Sacyr underperformed, rising 0.18 to 45.03, after being cut to 'reduce' from 'hold' at UBS and amid uncertainty surrounding its bid for Eiffage.

Leading blue chips were higher, with Telefonica putting on 0.21 to 17.02, BBVA adding 0.51 or 2.80% to 18.70 and SCH 0.23 higher at 13.85.

Driven by positive first quarter earnings, Prisa rose 0.44 or 2.56% to 17.60, while Bankinter put on 1.20 to 68.95, after reporting solid results and as M&A speculation lingered following yesterday's resignation of chairman Juan Arena.

Banco Popular underperformed to add 0.16 to 15.87, as its first quarter net interest revenues disappointed some investors.

Amongst small and mid caps, Vocento rose 0.44 or 2.87% to 15.75, after the media company announced that CEO Jose Maria Bergareche Busquet has resigned and will be replaced by Belarmino Garcia Fernandez, formerly head of France Telecom's Orange in Spain.

Zeltia rose 0.13 to 6.75, after announcing an around 100  million Eur equity line financing agreement with SCH Investment.

Altadis unit Logista was up 0.05 at 58.80, underperforming after a downgrade to 'hold' from 'buy' at SocGen.

Altadis rose 0.52 to 48.67.

Neighbours Italy saw Milan Share prices close higher, supported by speculation that Unicredito will merge with France's Societe Generale, with Mediobanca among the leaders on benefits from a wider merger trend.

The Mibtel index was up 1.16% to 33,831 points and the S&P/Mib gained 1.34% to 43,549.

Volume was an estimated 8.513  billion Eur.

Unicredito was up 2.86% to 7.445, off its highs.

Mediobanca rose 3.76% to 17.23. Brokers don't see the bank merging, despite some reports suggesting a link-up with Capitalia. Mediobanca will gain via extensive stakes in banks and advisory work.

Brokers said Capitalia, up 1.22% to 7.13, underperformed other banks after comments from bank chairman Cesare Geronzi that his bank will not merge with a foreign bank, and denied any talks with Unicredito.

Mediolanum gained 1.83% to 6.515, Generali rose 1.09% to 33.39.

Intesa Sanpaolo was up 1.79% to 5.975. During the session, CR Firenze announced it will study a link-up with Intesa Sanpaolo, as has been widely speculated. CR Firenze shares rose 0.84% to 5.795.

Fiat was up 1.74% to 20.46 ahead of Monday's results and reports on a possible tie-up between Fiat's Alfa Romeo brand and China's Chery.

Auto component firm Sogefi was up 2.26% to 7.01 after in-line results.

On the negative side, Alitalia lost 1.66% to 0.9215 on worries minority shareholders will lose out in the privatisation and that the new owner's restructuring won't kick in until 2009.

Mediaset fell 0.99% to 8.325. Brokers pointed to weak fundamentals as well as uncertainty on it taking a Telecom Italia stake. Telecom Italia added 1.28% to 2.38.

L'Espresso fell 0.16% to 3.9975.

Defensive stocks were out of favour in the European bank merger frenzy. Eni was up 0.66% to 24.45. Snam RG lost 0.54% to 4.825. Enel rose 0.30% to 8.415.

Finmeccanica lost 0.26% to 22.96. After the market shut it said it is seeking shareholder clearance to issue shares for up to 10% of its capital to institutional shareholders to fund expansion.

And bringing European markets to a close this week we go to Athens where Greek shares closed sharply higher, in line with strong international bourse sentiment, while Public Power Corp (PPC) and Hellenic Telecoms (OTE) shined.

The ASE general index closed 1.4% higher at 4,844.6, while the blue chip index was 1.3% higher at 2,588.8.

Mid caps rose 1.7% to 6,139.3 while small caps also jumped 2% to 933.

Advancers far outnumbered decliners, 222 to 41 while 55 remained unchanged in heavy trading volume of roughly 510  million Eur.

Electricity utility Public Power Corp (PPC) rose 3.4% to 18.2 Eur after its CEO Athanasopoulos said at a press conference that 2007 will be a turnaround year, without giving any specific plans.

Meanwhile, Hellenic Telecoms (OTE) spiked 2.6% higher to 21.56 Eur after it was upgraded to 'buy' from 'hold' at Citigroup on its shares upside potential.

Metal and engineering holding company Mytilineos jumped 2.9% higher to 38.04 Eur after its target was raised to 46.8 Eur from 38.8 Eur at UBS. The broker cited the potential of unit Metkas joint venture with Endesa as well as its restructuring potential. In other news on Mytilineos, its unlisted unit ELVO is to start a 75  million Eur project involving the assembly of 301 Hummer vehicles.

Alpha Bank ended 0.5% higher to 24.1 Eur after it said at todays three year business plan presentation in Bucharest that it expects an annual average rate of earnings per share growth of 20% for the period between 2007 to 2010.

Betting technology firm Intralot dropped 1.6% to 23.76 Eur, trading ex-dividend for the first day.

Luxury brand retailer Folli Follie gained 2.9% to 29.8 Eur, recovering from Thursdays selling pressure.

UK Market - Next was among the leading performers Friday as the FTSE 100 bounced back after three sessions of losses.

Next shares climbed 2.5% to £22.43 on talk that the clothing retailer had benefited from the recent warm weather and sales were running ahead of expectations.

Exane BNP Paribas, the French broker, said it was possible Next could announce like-for-like sales growth in its trading statement on May 16.

Simon Wolfson, chief executive, said at the time of annual results at the end of March, that he expected underlying sales to be down 1-4% in the six months to the end of July.

Elsewhere in the retail sector, private equity takeover rumours were swirling round Kingfisher, the parent company of the B&Q retail chain. Its price gained 1.8% to 263¼p on very large turnover of 124m shares.

The FTSE 100 closed up 46.2 points, or 0.7%, at 6,486.8, lifted by a strong opening on Wall Street and a bid battle for Alliance Boots, whose shares gained 7.2% to £11.25.

The heavyweight banking sector provided extra impetus for the advance.

Excited by rumours of a merger approach for France’s Société Générale, Barclays rose 1.6% to 750p, while Standard Chartered climbed 3.9% to £15.28.

Standard shares were also lifted by rumours of a £20 a share bid approach from Citigroup.

The FTSE 250 rose 101.6 points, or 0.9%, to 11,900.6.

Over the week, the blue chip index rose 24.4 points, while the mid-cap index lost 24.6 points.

Intercontinental Hotels Group bucked the strong market trend, however. Shares in ICH, a rumoured takeover target, eased 2.5% to £12.24 after a revenue warning on Thursday from Marriott International, a US rival.

On a more speculative tack, Yell Group, the owner of the Yellow Pages, firmed up 0.3% to 605p on speculation that it had asked Goldman Sachs to draw up a defence document against a possible private equity bid.

The rumours were played down by sources close to the company.

Vodafone added 2.8% to 143.1p, excited by rumours, later denied, that it was poised to sell its 45% stake in US mobile phone operator Verizon Wireless.

BHP Billiton lagged behind its peers in the mining sector, gaining just 1.5% to £11.51. Traders said it was held back by talk that it was preparing a bid for South Africa’s Eland Platinum. Among the mid-caps, Carphone Warehouse enjoyed further gains.

Its shares rose 2.6% to 303p after Merrill Lynch speculated that Carphone could announce at next week’s investor day that it had won the exclusive UK distribution rights for Apple’s iPhone.

Separately, Cazenove suggest that Carphone could become a takeover target for its US joint venture partner Best Buy. “With $2.7bn of net cash on the balance sheet (and a market cap of $24bn) Best Buy clearly has the firepower to do so,” the broker said. “While we do not see CEO Charles Dunstone as a outright seller at this stage, being part of a much larger, global retail group could offer some interesting opportunities.”

Engineering company Bodycote International sank 3.6% to 307p as hopes of a fresh bid from Sulzer of Switzerland faded.

Sulzer was Friday the subject of market raid in which Renova, an investment group controlled by Viktor Vekselberg, a Russian billionaire, swoop for a 32% stake.

Among the small caps, Inter Link Foods, the struggling cake maker, rose 5.7% to 111p after McCambridge Group, an acquisitive Irish food company, declared a debut holding of 3.3%. Traders believe McCambridge might use its stake as a platform from which to bid or to make an offer for one of Inter Link’s divisions.

Sci Entertainment fell 4.6% to 421½p unsettled by rumours that the company might have to lower earnings forecasts because of a delay with the launch of a new game.

Japan & Asia Pacific - Shares across the Asia-Pacific region closed higher, supported by a fresh record close on the Dow Jones Industrials index overnight. It is worth noting that many of these gains were led by property stocks.

Following a shake-out in Asian share markets on Thursday, investors sought the safety of local banking stocks expecting upcoming earnings announcements to be beneficial for sentiment in that sector.

In Japan Tokyo shares got a lift from a softer Yen which benefited exporters.

The Nikkei rose 0.46% on Friday, recouping some of the previous session's losses that came amid an Asian equity sell-off, as Advantest Corp. and other exporters rebounded on a weaker Yen and following calm trade in major overseas markets.

A string of positive media reports on earnings at major companies including Canon Inc. and Toyota Motor Corp. also encouraged investors to buy back recently battered high-tech and auto shares.

Tokyo Broadcasting System Inc. jumped by its daily price limit of 13% at one point after Rakuten Inc. said it planned to buy additional shares in the broadcaster.

I think that the market in Japan lacks solid buyers and is susceptible to speculative moves.

The problem is that I don't see substantial levels of buying in Japan. That's why the market easily swings and gets affected by the moves of speculators. Besides, investors are in no rush to take risks before corporate earnings are announced.

Trade volume fell to its lowest in two weeks, with 1.79 billion shares changing hands, before major companies start posting their earnings results next week for the year ended March 31 and projecting outlooks for the new year.

The Nikkei 225 Stock Average closed up 80.65 points or 0.46% at 17,452.62, off the day's high of 17,502.02. For the week, the index gained 0.51%.

The TOPIX index of all first-section issues added 3.14 points or 0.18% to 1,710.07, off a high of 1,714.54. For the week, the index rose 0.27%.

Canon rose 0.8% to 6,560 Yen, while Toyota added 1.2% to 7,380 Yen. Both shares benefited from the weaker Yen, which boosts profits when earnings from abroad are brought home.

KDDI Corp. became the largest contributor to the Nikkei's rise, climbing 1.8% to 976,000 Yen after the Nikkei business daily reported Japan's No. 2 phone operator will likely book an operating profit of about 350 billion Yen for the year ended March 31, higher than the company's recently revised estimate of 342 billion Yen.

Among other notable gainers, TDK Corp. added 1.2% to 10,260 Yen after US recording disk and tape maker Imation Corp. said on Thursday it would buy TDK's brand and sales operations in recording media for $300 million in stock and cash.

Hong Kong shares were stronger in afternoon trade with investors hoping that China will take a measured approach as it tries to cool down its economy.

The Hang Seng Index closed up 266.88 points or 1.31% at 20,566.59, off a low of 20,474.31 and just off the day's high of 20,567.34. For the week, the index is up 225.62 points or 1.1%.

Turnover Friday in Hong Kong was 63.0  billion hkd.

Country Garden, which made its trading debut Friday, closed at 7.27 hkd, up 35% from its IPO price of 5.38. It opened at 7.0 hkd.

Dealers said the strong debut helped boost sentiment on the property sector in general.

Henderson Land was up 0.75 hkd or 1.60% at 47.75, Sun Hung Kai was up 0.75 hkd or 0.83% at 91.60, Sino Land up 0.12 hkd or 0.73% at 16.62 and Cheung Kong was up 0.60 hkd or 0.60% at 101.40.

The property sector sub-index was up 225.86 points or 0.94% at 24.308.32.

Mainland property firms were also mostly higher despite speculation that the sector may be among those that may be hit by the Chinese government's expected credit-tightening measures.

Agile Property was up 0.12 hkd or 1.49% at 8.20, R&F Properties up 0.84 hkd or 4.47% at 19.62 and China Overseas Land up 0.10 hkd or 1.01% at 9.99.

Large-caps rebounded from Thursday's fall, with China Mobile gaining 2.40 hkd or 3.31% at 74.90 and HSBC rising 1.40 hkd or 0.98% at 144.60.

Other local banks were also higher, with Hang Seng Bank up 0.70 hkd or 0.63% at 111.50, Bank of East Asia up 0.95 hkd or 2.03% at 47.65 and BOC Hong Kong up 0.38 hkd or 1.99% at 19.48.

Philippine shares advanced Friday on bargain-hunting in select stocks on expectation of strong first-quarter coorporate earnings.

The benchmark 30-company Philippine Stock Exchange Index rose 16.70 points, or 0.5%, at 3,254.76, after shedding 1.7% Thursday.

Top traded Philippine Long Distance Telephone Co. gained 0.6% at 2,515 pesos, while Bank of the Philippine Islands was higher by 3.1% at 66 Pesos.

Advancers led decliners 74 to 34, while 65 stocks were unchanged.

The Peso hit a fresh six-year high against the US Dollar Friday after the central bank adopted measures to curb rapid money supply growth, which traders said would further boost the local currency.

Taiwan shares rose Friday, buoyed by strong recoveries in neighboring Asian markets.

The Weighted Price Index of the Taiwan Stock Exchange climbed 54.04 points, or 0.7%, to close at 7,942.67 in thin volume.

In Friday's trading the textile sub-sector showed impressive gains, rising 2.2%.

Far Eastern Textile rose 3.8% to close at New Taiwan Dollars 29.70.

The food sector was up 1.9%, paced by Wei-Chuan Foods, which finished the limit up 7% to NT$29.65.

Chinese stocks rose sharply on Friday, recovering almost all of Thursday’s 4,52% loss, as confidence returned after a brief panic in response to high inflation data.

The benchmark Shanghai Composite Index ended 3,92% higher at 3,584,204 points, less than 1% below Wednesday’s finish of 3,612,396.

Turnover in Shanghai A shares was heavy at 155,1 billion yuan ($20,1bn), although down from Thursday’s record 186,7-billion yuan. Gainers far outnumbered losers by 848 to 8.

Thursday’s tumble was caused by news that consumer price inflation jumped to 3,3% in March from 2,7% in February. That makes a 0,27%age point hike in benchmark interest rates likely in coming days or weeks, analysts said.

But many investors viewed Thursday’s drop as a natural pull-back after a spectacular rise - the index had surged 26% from the end of February to this week’s record high - rather than as the beginning of an extended slide.

While the market may stay volatile in coming weeks as investors worry about inflation, strong support for the index is believed to lie around 3,200 points and around 3,000, a level which capped the market in January and February.

Mainland-listed automakers rose strongly amid a flow of news from the 2007 Shanghai Auto Show, Asia’s premier auto industry event. Truck maker Anhui Jianghuai Automobile Co. jumped 9,54% to 10,68 yuan after it said it would market its first small sedan in the third quarter of this year, targeting sales of 200,000 units in 2010.

Shanghai Auto (600104.SS) and Changan Auto both rose more than 4%. Shares in the property sector, which could be among the hardest hit by an interest rate rise, jumped on Friday after having led Thursday’s decline.

Vanke, China’s biggest listed property developer, gained 2,81% to 17,93 yuan, regaining some of the 7% it lost on Thursday.

China Eastern Airlines, the country’s third-largest airline, rose 4,95% to 5,73 yuan following a sharp drop on Thursday.

The company said on Friday that its 2006 earnings were seriously hurt by high international prices of crude oil and jet fuel, but that demand for commercial flights was expected to grow this year.

Datang Telecom was one of the few shares to fall on Friday, after it issued a statement denying reports that its parent company was planning to list all of its major assets. Datang Telecom shares, resuming trade after a suspension since April 16 pending an announcement, ended 3,12% lower at 19,89 yuan.

Shares in Tsingtao Brewery, China’s second-largest beer maker, jumped 3,0% to 19,23 yuan after it posted a better-than-expected 76,9% rise in second-half earnings.

South Korean shares rose Friday, recouping most of the previous day's losses, with steelmaker Posco and transportation stocks leading gains. The Won also advanced.

The Korea Composite Stock Price Index, or Kospi, rose 19.42 points, or 1.3%, to 1,533.08. The market fell 1.4% Thursday on worries about overheating in China's economy.

Steelmakers rose after recent declines, boosted by a positive second-quarter outlook by US steelmaker Nucor Corp.

Posco, the world's third-largest steelmaker, rose 2.2% to 374,000 Won and Hyundai Steel Co. surged 6.8% to 39,300 Won.

Shipping and transportation shares were stronger on rising shipping fees on European routes, robust global demand and hopes for greater cargo demand after South Korea reached a free trade agreement with the United States.

Korean Air Co., the world's largest cargo carrier by freight volume, gained 4.3% to 42,550 Won.

Hanjin Shipping Co. rose 4.2% to 38,600 Won and Hyundai Merchant Marine Co. gained 1.5% to 24,550 Won.

Shipping companies usually start negotiations of shipping fares in May, and Hanjin looks set to reflect the global upside trend in new contract prices.

In currency trading, the US Dollar closed at 927.50 Won, down from 928.80 Won Thursday.

In Jakarta, Indonesian Share prices closed 2.63% higher with the main index ending at another all-time high in a technical rebound after Thursday's sell-off. The Jakarta Stock Exchange composite index closed up 50.378 points at a new high of 1,968.731.

In Thailand , Bangkok share prices closed marginally higher on Friday, supported by gains across the region as concerns over China's breakneck economic growth eased.

But the broader Thai market was kept in check as investors grew jittery over the kingdom's political outlook as a major rally against the military-backed government was scheduled for later this month.

The Stock Exchange of Thailand (SET) composite index rose just 0.30 points to 687.53, while the blue-chip SET 50 index added 0.12 points to 482.43.

Singaporean shares bounced back from the previous session's sharp fall to close higher, with quarterly earnings next week expected to set the market's near-term direction. The Straits Times Index, which fell 3.2% Thursday, closed up 69.39 points or 2.1% at 3,360.67.

Into India where The benchmark Sensex index opened with a positive bias Friday and continued its rally throughout the day on intense buying in Reliance Industries, Bharti Airtel, ONGC and SBI. Satyam led the advancers on strong fourth-quarter results and higher guidance. The market sentiment was upbeat even as inflation figures showed an increase. The market-breadth was strong and there were only three declining stocks in the Sensex. Inflation was up to 6.09% in the first current fiscal week.

The Sensex on BSE finished 277.71 points, or 2.04%, higher at 13,897.41.

Satyam rallied 6.3% to Rs 476.2, supported by better-than-expected fourth-quarter results. Satyam Computer fourth-quarter net profit rose 38% to Rs 394 crore, compared with the same quarter a year earlier. Satyam forecast 27% to 29% growth in earning per ADS for fiscal 2008, between $1.16 and $1.18. The US GAAP revenue is expected to rise 28% to 30%, between $1.87 billion and $1.9 billion for fiscal 2008.

Tata Steel soared 5.8% to Rs 534, and HDFC surged 5.5% to Rs 1,651. Tata Steel had rebounded from the last two days of decline caused by equity dilution worries after unveiling funding plans for its $12 billion takeover of Corus Group. Other gainers included Reliance Communications which rallied 5% to Rs 456. Reliance Communications had made strong growth in new subscriptions for the month just gone by.

Bharti Airtel advanced 3.4% to Rs 846. The company has launched a new set of prepaid cards, waiving processing fees. Named Airtel Happy Recharge, the cards will come in three denominations of Rs 299, Rs 399 and Rs 499 having a validity of 30 days. Index heavy Reliance Industries gained 3.4% to Rs 1,543.75.

ONGC gained nearly 3% at Rs 921. Oil prices rose as OPEC member, Nigeria, is holding elections this weekend, ahead of the US May futures contract expiry later on Friday. Larsen & Toubro an SBI moved up 2% each to Rs 1,695 and Rs 1,075, respectively. SBI advanced after the it said it planned to borrow up to Rs 10000 crore during 2007/08. Gujarat Ambuja was up 1.8% at Rs 115.

Wipro lost 1.4% to Rs 571. Wipro today posted 44% growth in net profit in the March 2007 quarter to Rs 861 crore as per US GAAP, compared with the same time a year ago. It also forecast strong growth on more outsourcing and higher billing rates.

Hindustan Lever and Hero Honda were the other two declining stocks in the Sensex. Hindustan Lever lost 0.8% to Rs 206 and Hero Honda dipped 0.7% to Rs 649.6.

The Australian stockmarket ended the week in positive territory buoyed by strong gains from the financial and resources sectors.

The benchmark S&P/ASX200 Index was up 42.4 points to 6207.5 points, while the All Ordinaries gained 38.9 points to 6187.2. Over the trading week, the S&P/ASX 200 added 71.8 points or 1.2%.

At the close of day trading on the Sydney Futures Exchange, the June Share Price Contract was 43 points higher at 6228, on a volume of 19,371 contracts.

The biggest success story of the week was explosives manufacturer Orica, which enjoyed a 24% rally after rejecting a takeover offer from private equity concerns. Investors were still happy to buy Orica around the closing price of $33.90 on Friday, cheered by management's assertion that a takeover offer of $32 undervalued the company.

Locally, the banks were stronger. ANZ put on 31 cents to $31.21, the National Australia Bank gained 29 cents to $43.70, Westpac added 25 cents to $27.35 and the Commonwealth Bank climbed 50 cents to $53.20.

The media sector was mixed.

News Corp edged three cents higher to $29.83 and its non-voting shares gained five cents to $27.95.

Rural Press lost four cents to $14.00 after the company's ordinary shareholders yesterday approved the regional publisher's merger with Fairfax Media to create a $9 billion media group. Fairfax dropped one cent to $5.11.

Sunraysia Television, the owner of Channel Nine Perth, has recommended a $146.2 million offer for the television station from broadcasting outfit WIN Corp Pty Ltd over a rival bid from PBL Media.

Sunraysia shares remained untraded at $14.00, while PBL slipped five cents to $20.45.

The retailers were stronger. Coles added 11 cents to $17.22, Woolworths climbed 24 cents to $28.79, David Jones put on six cents to $4.65 and Harvey Norman gained 1 cent to $5.05.

The energy sector was mixed despite a drop in the oil price overnight. Woodside was 57 cents higher at $39.12, Santos fell five cents to $11.10 and Oil Search was steady at $3.66.

The big miners were stronger and BHP Billiton put on 23 cents to $29.85 while rival Rio Tinto gained 87 cents to $83.42.

New Zealand stocks ended a relatively subdued week on a flat note Friday, with solid performances by a few large cap stocks allowing the market to eke out modest gains.

The benchmark NZX-50 index edged up 2.3 points, or 0.1%, to 4,182.90. Brokers expect the market to remain quiet, with a tendency toward the downside, ahead of the central bank's interest rate review on April 26.

National carrier Air New Zealand was the standout performer, gaining 6% to NZ$2.65, it's highest level since September 2003, following an upbeat operating report Thursday.

Bellwether Telecom gained 1% to NZ$4.90, finding some buying support from Australia.

The high New Zealand Dollar continued to weigh on the earnings outlook for export stocks.

Healthcare concern Fisher & Paykel Healthcare dropped 1.1% to NZ$3.55, while fisheries and seafood company Sanford also continued to slide, losing 1.7% to NZ$4.70.

Pay television operator Sky Television fell 1.4% to NZ$6.16, on profit taking after gaining earlier in the week.

Commodities - London’s InterContinental Exchange is to launch a contract for Middle Eastern sour crude oil futures to compete with the contract that will trade on the Dubai Mercantile Exchange. The DME intends to start its contract in June, but ICE, which sponsors the Brent sweet crude contract, said it would launch on May 21, pending UK regulatory approval.

Oil prices rose Friday as traders’ attention turned to Nigeria’s presidential elections this weekend and the possibility of disruptions to supplies from the world‘s eighth largest crude exporter.

ICE June Brent rose 39 cents to $66.33 a barrel, down 3.4% this week. Brent came under pressure on reports from Nigeria that Shell had resumed limited production from the 380,000 b/d Forcados field, although the company did not confirm this. However, dealers were concerned that if Nigeria’s presidential elections were tainted by allegations of vote rigging, further violence could affect supplies.

Nymex May West Texas Intermediate contract, expiring Friday, gained $1.05 at $62.88 a barrel, down 1.2% this week. June WTI added 44 cents at $63.76 Friday.

US gasoline stocks have fallen for 10 consecutive weeks as supplies tighten ahead of the summer driving season. Nymex May RBOB gasoline rose just under 2 cents to $2.1079 a gallon Friday but fell 3.3% over the week.

Gold rose 1% to $691.80 a troy ounce this week, supported by Dollar weakness and news of progress in Iran’s nuclear programme.

Platinum gained 3.2% at $1,313 a troy ounce, helped by renewed fund interest following plans by Zurich Cantonal Bank and ETF Securities to launch platinum exchange traded funds. Two major platinum producers voiced concerns, fearing the ETFs could cause a price spike and damage jewellery demand.

Base metals displayed resilience despite concerns that China might be forced to raise interest rates to cool rapid economic growth.

Copper rose 3.3% this week to $7,960 a tonne, supported by concerns over supply disruptions at the giant Grasberg copper mine in Indonesia, where workers have threatened to extend their protest for a month if welfare benefit demands are not met.

After hitting a contract record of $15,200 on Wednesday, tin fell 4.3% this week to $13,750 a tonne after the Indonesian government approved export permits for two smelters this year.

Nickel added 5.2% to $48,900 a tonne as available stocks remain critically low at around 2,900 tonnes.

May wheat futures rose 4.9% to $5.02 a bushel in Chicago this week on reports of frost damage to US planting. Global wheat stocks stand at near record lows and concerns are mounting about drought affecting the Australian harvest.

Wet weather has slowed spring corn planting but conditions are expected to improve in the midwest in the next few days. May corn fell 1.5% to $3.63½ a bushel this week.

Currencies - Sterling burst through $2 this week for the first time since September 1992 when the Pound was ejected from the European exchange rate mechanism on “Black Wednesday”.

A perfect storm of inflationary surprises set the Pound on its way, as stronger producer prices than expected on Monday were followed on Tuesday by UK consumer price inflation hitting 3.1%, more than 1%age point higher than the Bank of England’s 2% target.

Data showed that activity in the housing market remained robust, while wage growth in Britain was also unexpectedly high, hitting 4.6% – above the 4.5% that the BoE considers consistent with price stability.

Meanwhile, minutes from the central bank’s monetary policy committee meeting earlier in the month suggested that an interest rate increase to 5.5% in May was all but a done deal.

March’s rise in inflation will not, on its own, determine the path of interest rates beyond the widely expected May hike. But when taken in the context of the more general evidence of a rise in companies’ pricing power, I think it tips the balance in favour of a further rate rise to 5.75%.

Meanwhile, benign inflation in the US cemented expectations that the Federal Reserve’s next move, although not seen coming any time soon, would be to cut rates.

By midday in New York Friday, the Pound stood at $2.0022, unchanged on the day, but up 0.7% over the week. The UK currency hit a high of $2.0133 on Wednesday – a level not seen since June 1981. Sterling was 0.4% higher over the week against the Euro at £0.6788.

The Euro was buoyed by an increasingly hawkish European Central Bank. ECB policymakers appeared unperturbed by the Euro’s strength this week, and focused their comments on the Eurozone’s robust growth prospects and the likely need to act to control medium-term inflation risks.

Germany’s ECB governing council member Axel Weber said the central bank could not give the “all-clear” in terms of its current monetary policy, refusing to rule out more rate increases.

ECB interest rate decisions hinge on medium-term inflation prospects, and with unemployment at historic lows, capacity utilisation elevated, and firm growth momentum, there remains a risk that inflation eventually becomes too high.

The ECB is firmly expected to raise its main rate by a quarter point to 4% in June. The Euro hit a succession of two-year highs against the Dollar this week, reaching $1.3637 Friday but ended the week only 0.2% higher at $1.3601.

The Yen ’s prolonged slide as a result of strong demand for carry trade funding was briefly halted this week.

Fears that China’s overheating economy might provoke a strong response from the People’s Bank of China hit equity markets on Thursday, reminding investors of the events of February 27, when the Shanghai Stock Exchange fell 9% in one day and heralded three weeks of volatile trade.

This encouraged traders to take some of the profit from their carry trade positions, a risky strategy where they borrow low-yielding Yen to fund purchases of higher-yielding assets.

The Euro hit a fresh record of Y162.42 on Monday but was down 0.1% on the week to Y161.82. The Dollar fell 0.3% to Y118.92. Sterling managed to recover from Thursday’s profit-taking and ended up 0.4% on the week at Y238.13.

New Zealand , with overnight rates of 7.5%, is one of the favoured carry trade destinations. Its Dollar fell sharply against the Yen on Thursday but recovered to end the week 0.3% higher at Y88.54.

The Australian Dollar ended the week 0.3% lower at Y99.32.

The Canadian Dollar gained ground against the US currency on Friday as several supporting factors, including better-than-expected domestic retail sales data and higher commodity prices, kept it at a 5-1/2 month high. The Canadian currency closed at C$1.1230 to the US Dollar, or 89.05 US cents, up from C$1.1295 to the US Dollar, or 88.53 US cents, at Thursday's close.

The Rand remained firm in late trade on Friday, eyeing the R7 per Dollar level, as the Dollar remained on the ropes. In late afternoon trade, the Rand was bid at R7,0140 per Dollar from an overnight close of R7,0401. It was bid at R9,5340 to the Euro from a previous R9,5925 and at R14,0384 against Sterling from Thursday’s R14,0950.

As always, closing out currencies for the week here in China, the RMB finished at 7.7179 to the Dollar on the over-the-counter (OTC) market, compared with a close of 7.7165 Thursday.

China - China's economy grew at a blistering 11.1% annual pace in the first quarter on the back of booming investment and exports, fuelling speculation that interest rates would need to rise again soon.

The growth rate announced on Thursday was broadly in line with the 11.0% forecast by economists in a Reuters poll but it marked an acceleration from 10.4% in the fourth quarter of 2006.

Global stocks and the Yen sank as the data exacerbated expectations of a rate rise. Chinese stocks lost 4.5%, the sharpest drop since February 27 when the Shanghai Composite Index <.SSEC> lost 9%, roiling world markets.

Premier Wen Jiabao followed the release with a prompt warning on the need for Beijing to take timely steps to keep the world's fourth-largest economy on an even keel.

"We need to prevent the economy from shifting from relatively fast growth to a state of overheating and to prevent big ups and downs," Wen said in a statement on the government's Web site.

"We will work hard to keep basic stability in the overall level of prices," he told a regular cabinet meeting.

The strong data prompted a number of economists to predict that the central bank would take further tightening steps soon.

The People's Bank of China, in an effort to rein in an investment boom, has already raised interest rates once and increased banks' required reserves three times this year.

This was a very strong move and undoubtedly in my view it means more tightening. I think there will be at least two more rate hikes and the reserve ratio will have to go up to 12% from 10.5%.

The National Bureau of Statistics said that annual consumer price inflation reached 3.3% in March, the first time it has gone above 3% -- the central bank's comfort level -- in more than two years.

China's stock markets had been braced for a high inflation figure, expecting that it could herald another rise in interest rates, which the central bank last lifted in mid-March.

The figures prompted some analysts to raise their forecasts for full-year growth.

Standard Chartered increased its 2007 GDP growth forecast to 10.6% from 9.6%. JPMorgan upped its forecast to 10.8% from 10.0%.

Statistics agency spokesman Li Xiaochao told reporters that the economy might be on its way towards overheating, potentially heralding further tightening.

"Whether we need to raise interest rates depends on whether our economy will turn to overheating from fairly fast. If this happens, interest rates need to be raised. If this does not happen, then there is no need to raise them," Li said.

He also said that China faced more inflationary pressures due to uncertainties over food prices and likely moves by Beijing to further deregulate controls over utility prices, driving up the prices of water and electricity.

But I firmly believe that the figures, which included a pick-up in annual growth in urban fixed-asset investment to 26.8% in March from 23.4% in the first two months, already clearly signal that growth is still running way too fast.

European Commission spokeswoman Amelia Torres, on the opposite tack to me, told reporters in Brussels this week that the accelerating growth was positive news for European exporters, adding that the EU hoped China's domestic demand would grow progressively - go figure!

Detailed figures suggested that was happening. Retail sales were up an annual 15.3% in March, accelerating from 14.7% in January-February and 13.7% in all of 2006.

Beijing has repeatedly said it hopes to boost domestic consumption to help rebalance its economy away from its current over-reliance on investment and exports. Those imbalances remained one of the most serious challenges facing policy makers, the statistics agency stressed on Thursday.

However, many economists say that to really trim the massive trade surplus, which doubled from a year earlier in the first three months to $46.4 billion, it needs to let the yuan <CNY=CFXS> appreciate more quickly.

The RMB on Thursday breached the psychologically important 7.7200 mark against the Dollar for the first time since the central bank revalued it by 2.1% and decoupled it from a Dollar peg in July 2005. It has now appreciated nearly 5.1% since then.

It has always been - and remains - my view that the Government in Beijing know exactly what they are doing with the RMB exchange rate.  We are not going to see its appreciation slow anytime soon and of course, please remember that it is in their own interests to go into the Beijing Olympics with a strong RMB; after that, is anyone's guess and that statement just not just apply to the currency, it applies to what happens with much of China!