European morning wrap: Early morning jitters morph into apparent optimism

Statement by the euro area heads of state or government Bundesbank: "Fundamentally open" to bilateral loans to IMF - Dow Jones German advisor Bofinger: EU deal "insufficient" - Bloomberg China investment vehicle to create "300 bln fx investment vehicle.  Vehicle to comprise two funds, one focused on Europe and one on U.S - Reuters quoting source ECB seen buying Italian and Spanish bonds ECB sources: ECB sovereign bond buying capped at maximum 20 bln euros per week - Reuters China ForMin: Beijing has noted important steps decided at EU summit ECB: Banks borrowed 8.04 bln from lending facility Thursday, lower than Wednesday but still high Ireland's minister of european affairs: 50/50 chance of Ireland requiring a referendum on european fiscal integration ECB's Ophanides: Bond markets are about trust ECB's Knot: ECB has had informal ECB meetings about emergency  liquidity assistance for banks. Southern european bank sector is slowly running empty as debt crisis continues ECB's Nowotny: ECB doing utmost to avoid having Europe enter recession More Nowotny: Dangerous to automatically talk down results of EU summit And even more Nowotny: Won't rule out potential danger of credit crunch in euro zone German FinMin: Sees weaker economic growth in Q4 Bk of Italy's Visco: Need further govt measures soon to up growth More Visco: Must understand, respect German "obsession" with not monetising debt Been quite a marked turnaround in sentiment this morning.  Early jitters have morphed into apparent optimism, European stocks rallying very strongly after a weak start while the single currency has had a decent morning. EUR/USD up at  1.3405 from early 1.3330.  Inbetween we've been down to 1.3280 and all the way up to 1.3433 in very volatile trade. Early sell off reached 1.3280, single currency not helped by Moodys' downgrading French banks.  Sovereign buying (both Middle Eastern and Asian) then lent support and we were quickly back over 1.3300. Reports of ECB buying Italian and Spanish bonds helped provide a little more support.  Talk had sell orders clustered up at 1.3340/50 with stops just above and indeed there was a major tussle around 1.3350. The euro bulls won out and the single currency ground higher. Then Dow Jones carried comments from the Bundesbank, that they are "fundamentally open"  to bilateral loans to the IMF and we spiked quickly over 1.3400 to session high 1.3433 before settling back. Cable up at 1.5705 from early 1.5615, the rally acclerating when buy stops tripped through 1.5660. USD/JPY effectively unchanged at 77.65. EUR/JPY up at 104.10 from early 103.45.