Volkswacht Bodensee - Chinese stocks extend surge, Europe higher on Beijing stimulus

In foreign exchange, the yen rallied against the dollar after Japan's ruling party elected a new leader, Shigeru Ishiba, who backs interest-rate hikes.

Europe's main stock markets were on course to end the week with solid gains -- as the luxury and car sectors continued to benefit from hopes of rebounding Chinese demand.

Investors waited to see if Wall Street would reach more record highs as focus switches to key US inflation data later in the day.

Gold, which this week hit all-time heights as the dollar weakened on the prospect of more cuts to US interest rates, cooled Friday. Oil prices edged higher after suffering some heavy losses this week.

"Having been one of the most unloved parts of the investment market for several years, investors have raced to buy Chinese shares in a blockbuster week for Asian markets," noted Russ Mould, investment director at AJ Bell.

"A veritable feast of economic stimulus measures has led investors to take a more optimistic view of the earnings potential for Chinese companies and foreign ones selling into the country.

"Lower borrowing costs, smaller deposits for buying homes and more capacity for banks to lend money -- these lay the foundations for greater economic activity among businesses and consumers," Mould added.

The Hong Kong and Shanghai stock markets won more than 10 percent this week, with the latter index seeing its strongest weekly gain since 2008.

While some analysts have warned that the measures -- the boldest in years -- will not on their own be enough to get the economy back on track, they have provided some much-needed cheer to investors and raised hopes that the government is listening to calls for major help.

Chinese officials on Friday said they had cut the amount of cash banks must hold in reserve in a bid to get them lending more to revive economic activity -- a move that would pump more than $140 billion into financial markets.

A Bloomberg report Thursday said Beijing may pump a similar amount into the country's large state-run banks in the first such move of support since the global financial crisis.

"Beijing seems finally determined to roll out its bazooka stimulus in rapid succession," said Nomura chief China economist Ting Lu.

A more upbeat mood on trading floors is thanks also to the Federal Reserve's bumper cut to US interest rates last week and indications that more were in the pipeline through to 2026.

The bank's policy outlook will be in focus Friday with the release of its preferred gauge of inflation.

- Key figures around 1015 GMT -

London - FTSE 100: UP 0.5 percent at 8,322.65 points

Paris - CAC 40: UP 0.4 percent at 7,776.50

Frankfurt - DAX: UP 0.8 percent at 19,384.20

Tokyo - Nikkei 225: UP 2.3 percent at 38,829.56 (close)

Hong Kong - Hang Seng Index: UP 3.6 percent at 20,632.30 (close)

Shanghai - Composite: UP 2.9 percent at 3,087.53 (close)

New York - Dow: UP 0.6 percent at 42,175.11 (close)

Dollar/yen: DOWN at 143.19 yen from 144.87 yen on Thursday

Euro/dollar: DOWN at $1.1160 from $1.1174

Pound/dollar: DOWN at $1.3383 from $1.3412

Euro/pound: UP at 83.40 pence from 83.31 pence

Brent North Sea Crude: UP 0.1 percent at $71.69 per barrel

West Texas Intermediate: UP 0.1 percent at $67.73 per barrel

burs-bcp/ajb/lth

P.Vogel--VB