Only seven of 91 European banks failed stress tests - Hypo Real Estate Holding AG, Agricultural Bank of Greece SA and five Spanish savings banks. The European regulators say the seven banks need to raise 3.5 billion Euros in capital.

European shares rose for a third day on Friday with investors encouraged by earnings results and economic data. The FTSEurofirst index rose by 0.5pct. While the UK FTSE was flat, the German Dax rose by 0.4pct.

US sharemarkets rose again on Friday. Earnings results continue to beat expectations and there were no surprises in European bank stress tests. The Dow Jones rose by 102 points or 1.0pct with the S&P 500 up 0.8pct, and the Nasdaq rose 23 points or 1.1pct. Over the week the Dow Jones rose 3.2pct with the S&P 500 up 3.6pct and Nasdaq rose 4.2pct.

US treasuries fell on Friday (yields higher) after the European bank stress test results. US 2yr yields rose 2pts to 0.588pct and US 10yr yields rose 6pts to 3.00pct. Over the week US 2yr yields rose by almost 1pt and US 10 yr yields rose by 7pts.

Major currencies rose against the US dollar in US trade as investors became more optimistic on the global economic outlook. The Euro fell from around US$1.2965 to US$1.2800 in European trade, before lifting in US trade to end near US$1.2915. The Euro has slipped to US$1.2880 this morning. The Aussie dollar held between US89.00c and US89.70c over the European and US session, ending US trade near the day´s highs. But the Aussie has slipped to US89.40c this morning. And the Japanese yen eased from 86.85 yen per US dollar to JPY87.50 over the European and US sessions, before ending US trade near JPY87.35. The yen has eased to JPY87.75 this morning.

US crude oil prices eased modestly on Friday as investors took profits from 11-week highs after bank stress test results were largely as expected. The Nymex crude oil contract fell by US32c or 0.4pct to US$78.98. But traders were watching the progress of Tropical Storm Bonnie across the Gulf of Mexico. London Brent crude fell by US37c to US$77.45 a barrel. Over the week oil rose by US$2.97 a barrel or 3.9pct.

Base metal prices were mixed on the London Metal Exchange on Friday ahead of bank stress test results. Aluminium fell 0.6pct and zinc lost 2.2pct but lead rose 2.0pct with other metals up 0.2-0.5pct. Over the week metals rose between 2.6-11.8 pct, with aluminium doing worst and lead doing best. But the Comex gold price fell as investors took profits and trimmed defensive positions, easing by US$7.80 an ounce to US$1,187.80. Over the week gold was largely unchanged.

Ahead: In Australia, the producer price index is released. Wesfarmers (Coles) and Harvey Norman release sales results. In the US new home sales figures are released. Sixty companies report earnings.

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