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The following are the top stories from selected Canadian newspapers. Reuters has not verified these stories and does not vouch for their accuracy. _0"> THE GLOBE AND MAIL * A crash of China's shadow banking system would send shock waves through the Canadian economy, depressing commodity prices and triggering a housing market correction, the Bank of Canada warned in a new report. Other major risks to the Canadian system remain largely unchanged, including the threat of a house price collapse at home, sharply higher interest rates or the euro crisis. ( r.reuters.com/daz99v ) * More than a million encoded BlackBerry messages have been viewed by police as part of a crackdown against Quebec organized crime. In arresting more than 30 people on Thursday, the Royal Canadian Mounted Police took the rare step of publicly highlighting its interception of BlackBerry Inc's supposedly secure "PIN-to-PIN" communications. ( r.reuters.com/haz99v ) Reports in the busi

German bonds recovered after an earlier fall on Friday, as investors shrugged off worries that a rates rise in the UK would have a knock on effect for euro zone government borrowing costs. Bund futures, the most actively traded securities in euro zone bond markets, initially dropped as much as 43 ticks at Friday's open after Bank of England Governor Mark Carney said UK interest rates could rise sooner than financial markets expect. However, by mid-morning, Bund futures made a full reversal, climbing to daily highs of 145.63, 37 ticks up on the day. Strategists said data confirming the euro zone's alarmingly weak inflation served as a reminder that the path of ECB policy had completely diverged from its peer across the channel. "These deflation pressures show the ECB will keep rates low for a very long time, which is the most important thing for investors," said Christian Lenk, strategist at DZ Bank. Fears around low inflation in the euro zone have centered on th

The dollar rose around a third of a percent against the yen as markets listened to the Bank of Japan's latest comments on policy on Friday while sterling soared on a surprise hint from the Bank of England that interest rates could rise this year. The big action overnight was all on the pound. BoE Governor Mark Carney sent money market rates spinning higher by telling London's financial community at Thursday's annual Mansion House dinner that rates may rise sooner than markets currently expect. That sent sterling to a 19-month high against the euro and close to key resistance around $1.70, up around 1 percent since the close of play in London on Thursday. "For us, this was a clear signal that the first hike will come this year," said Lee Hardman, a strategist with Bank of Tokyo Mitsubishi-UTJ in London. "We think the first month for the bank to move will be November." The move was all the more shocking given how little faith the market has shown in t

In the struggle to explain this year's collapse in volatility and volume in financial trading, one newly-nominated culprit is central banks' intent to use every tactic available short of raising interest rates too soon. It sounded like a deeply contrarian view on Friday after comments by Bank of England Governor Mark Carney, but a study by analysts from market heavyweights HSBC this week argued that the use of macroprudential steps will make central bank interest rates in general less volatile in future. Implicitly that may mean markets see less marked swings. The global economy is right at the point, as the economic fates of Japan, Europe and the United States diverge, when an upturn in trading action could be expected due to the growing chances for arbitrage between future interest rates. Yet volatility, which traders depend upon for profits, is at rock bottom. Trading in currencies on the biggest platforms has fallen by a third to half in the past year; options contract

China and Britain will sign business deals worth at least $30 billion next week during a visit to London by China's Premier Li Keqiang, the Chinese ambassador to Britain said on Friday. _0"> "The total value may be record-breaking," Liu Xiaoming, China's ambassador to Britain, told a news conference in London, saying that over 40 separate agreements whose total value was at least $30 billion would be signed. The deals would cover a range of sectors, including energy, education and finance, he added. "This visit is a priority to China and the UK. Expectations are very high," he said, saying Li would be joined by over 200 Chinese business leaders. The two sides will discuss possible Chinese investment in Britain's planned HS2 high-speed rail network linking the north of England with London and in its nuclear sector, he said. There will also be banking deals. Li will meet with British Prime Minister David Cameron at his London residence on Jun

Britain's finance minister George Osborne this week rejected European Union plans to outlaw currency market manipulation and instead set out his own proposals to make rigging exchange rates a criminal offence. A panel led by the Bank of England and including the Treasury and Financial Conduct Authority will recommend new criminal sanctions which meet the needs of London, where much of the largely unregulated FX market takes place. Osborne's announcement comes as regulators around the world investigate allegations of collusion and price-manipulation in the $5-trillion-a-day market, by far the world's largest. Since the allegations first surfaced last year, some 40 traders have been placed on leave, suspended or fired by some of the world's biggest banks. No individual or bank has been accused of wrongdoing and no evidence of wrongdoing has been found. All the banks involved are cooperating with the regulators. Below is a timeline on the scandal engulfing the FX m

The dollar edged higher against a basket of major currencies on Friday for the first time in three sessions after violence in Iraq triggered a safety bid for the U.S. currency, while higher U.S. bond yields underpinned the move. Escalating insurgent conflict in Iraq resulted in a cautious mood, while renewed focus on the potential for more monetary stimulus in Japan and higher U.S. Treasury yields drove demand for the dollar. "The dollar is enjoying a safety bid on renewed instability in Iraq," said senior analyst Joe Manimbo at Western Union Business Solutions in Washington. Traders dismissed data showing slightly weaker-than-expected U.S. consumer sentiment in June. The Thomson Reuters/University of Michigan's preliminary June reading on the overall index on consumer sentiment came in at 81.2, down from 81.9 the month before. The dollar also advanced against the Japanese yen after traders reconsidered the potential for more monetary stimulus from the Bank of Japan.