E.U. Debts Talks Nearing Agreement

European leaders are nearing agreement on a plan that would see the region's banks raise around EUR100 billion in fresh capital, said three people familiar with marathon talks taking place Sunday.

The bank recapitalization plan is the easiest piece of a three pronged bargain that the 17 euro-zone nations are hoping to reach during meetings that began Sunday and will continue through at least Wednesday.

There remain disagreements on the other two measures steps to boost the firepower of the bloc's EUR440 billion bailout fund and, critically, to deal with Greece's spiraling public debt through a complex restructuring. The three issues Greece, the bailout fund and the bank plan are closely linked.

The size of the recapitalization depends in part on how big a haircut governments would demand of Greece's private creditors. The bigger the haircut, the greater the losses European banks could suffer. And governments' ability to plug the gap in banks' balance sheets will depend on the firepower of the fund, called the European Financial Stability Facility, since governments that can't afford recapitalization on their own may turn to the fund.

U.S. Stocks

U.S. stocks surged higher Friday and registered another weekly gain, following a batch of corporate earnings and ahead of the weekend's European Union summit on the sovereign-debt crisis.

The Dow Jones Industrial Average rallied 267.01 points, or 2.31%, to 11808.79, finishing the week up 1.4% and closing at its highest level since Aug 3. The blue chip measure secured its fourth-straight weekly gain, its longest weekly winning streak since January. The index has risen 9.6% during the streak and is now up 2% this year.

McDonald's helped to push the Dow higher, rising $3.31, or 3.7%, to 92.32. The fast-food company's third-quarter earnings rose as sales growth made up for the food-cost inflation it faces world-wide. Travelers jumped 2.82, or 5.2%, to 57.35, and American Express gained 2.27, or 4.9%, to 48.46, helping to pace the Dow's gains.

The Standard & Poor's 500-stock index gained 22.86 points, or 1.88%, to 1238.25, led by the consumer-discretionary, materials and financial sectors. The index also rose 1.1% for the week, its third-consecutive week of gains and longest winning streak since Feb. 18. The Nasdaq Composite advanced 38.84 points, or 1.49%, to 2637.46. The technology-oriented index is up 9.2% this month, but is still down 0.6% for the year. Investors remain fixated on how European leaders will combat the debt crisis that has spread to many regions across the euro zone. Euro-zone finance ministers also approved the latest disbursement of a loan payment for Greece.

E.U. Stocks

European stocks surged and the euro jumped against the dollar Friday, boosted by reassurances that European leaders were edging closer to a deal on the euro zone's key bailout fund. Although an agreement on a plan to expand the European Financial Stability Facility won't be reached until a summit Wednesday, not Sunday as was previously expected, markets took some cheer from a joint statement from German Chancellor Angela Merkel and French President Nicolas Sarkozy, which at least showed some semblance of unity on the matter.

In addition, an agreement on recapitalizing Europe's banks should be reached by European Union finance ministers Saturday, according to a senior EU diplomat, but there was still no agreement on a writedown on Greece's massive EUR350 billion debt.

The benchmark Stoxx Europe 600 index ended up 2.5% at 238.93, the biggest percentage gain since Oct. 6. It has been a volatile week for equity markets, with the Stoxx Europe 600 suffering from three down days and two up days in the past five sessions. The index closed up just 0.2% since last Friday.

Among other indexes, London's FTSE 100 ended up 1.9% at 5488.65, its highest closing level since Aug. 3. Frankfurt's DAX finished 3.5% higher at 5970.96 and Paris's CAC-40 increased 2.8% at 3171.34. Banking stocks posted some of the strongest gains, benefiting from investor optimism surrounding a debt-solution deal and finalization of recapitalization plans.

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The Stoxx Europe 600 banks index rose 3.8%. UniCredit gained 6.6%, having fallen over 11% on Thursday, demonstrating what a tumultuous week it has been. In corporate news, Banco Santander, the euro zone's largest bank by assets, ended up 2.9% after it reached a deal to sell 35% of its U.S. consumer finance unit for $1.15 billion, in an unexpected move to boost solvency.

Shares in mid-cap stock Thomas Cook rose 13% in London, having risen all of 20% earlier, as it gained some breathing space ahead of its December covenant test, striking a deal with its banks to amend the terms of its current bank facilities and signing a new GBP100 million loan.

Asia-Pacific Markets

Asian equity markets ended mixed after choppy trade Friday, as sentiment was weighed by concerns Europe's efforts to deliver a comprehensive plan to resolve the euro-zone debt crisis might unravel. Japan's Nikkei Stock Average ended flat and Australia's S&P/ASX 200 index edged down 0.1%, while South Korea's Kospi jumped 1.8%. Hong Kong's Hang Seng Index rose 0.2%, while China's Shanghai Composite shed 0.6%.

In afternoon trade, India's Sensex was down 0.1%. Growth-sensitive resources plays were mostly lower after copper settled down 6.2% at a 15-month low in New York Thursday, partly due to a Chinese government crackdown on metal for collateral. Rio Tinto shed 0.5% in Sydney and Tokyo-listed Sumitomo Metal Mining lost 1.5%. Zijin Mining's Hong Kong and Shanghai shares fell 3.2% and 1.7% respectively.

But Sydney-listed heavyweight BHP Billiton bucked the trend and rose 0.6% after its chief executive said Thursday the company's order books are still full and industrial demand in the developing world remains healthy. Also bucking the trend, South Korea's construction stocks rose on expectations of increased orders from the Middle East as the death of former Libyan leader Moammar Gadhafi is likely to ease political tensions there.

Daewoo Engineering & Construction jumped 7.8% and Hyundai Engineering rose 6.6%. Hynix Semiconductor tacked on 10.6% after the Wall Street Journal reported its memory chips appeared in Apple's new iPhone 4S model, possibly at least partially supplanting rival Samsung Electronics. LG Display added 7.8% despite posting a record third-quarter net loss as investors focused on its brighter outlook.

China's banks were mostly higher after the country's Ministry of Finance Thursday unveiled a trial program to allow four local authorities in eastern and southern China, the economic hubs of the country, to sell bonds directly. Bank of Communications' Hong Kong and Shanghai shares added 2.0% and 0.9% respectively, while China Minsheng Banking's Hong Kong and Shanghai shares were up 3.2% and 1.9% respectively.

Citic Resources Holdings jumped 24.1% after the company said it expects to book a one-time gain from the sale of its 16.34% stake in Australia's Macarthur Coal. The one-time gain is expected at HK$3.11 billion, compared with its market capitalization of a tad above HK$7.00 billion.

Commodities

Base metals closed sharply higher Friday, recovering most of the previous session's losses on strong fund buying and a jump in the euro, which triggered some short covering activity in the markets, industry participants said. LME three-month copper closed the day at $7,145 a metric ton, up 6.2% on Thursday's close.

Lead rose the most out of the metals in percentage terms, up 7% to $1,915/ton on the day. Crude oil futures rose Friday amid high hopes going into a weekend summit of European leaders working to resolve the sovereign debt crisis, following equities and the euro higher. Prices jumped as trading opened in New York and were up as much as 3% in midmorning trade before settling back.

Light, sweet crude for December delivery ended the day up $1.33, or 1.6%, to $87.40 a barrel on the New York Mercantile Exchange. Brent crude on the ICE Futures Europe exchange settled 20 cents lower, or 0.2%, to $109.56 a barrel. Gold rose for the first day this week Friday and industrially focused precious metals climbed, as a weaker dollar and optimism about Europe's debt crisis drew some buyers to the downtrodden markets. The most actively traded gold contract, for December delivery, rose $23.20, or 1.4%, to settle at $1,636.10 a troy ounce on the Comex division of the New York Mercantile Exchange. The contract fell 2.8% during the week.

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