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European Markets Finished Higher But Spanish Concerns Linger

The European markets began the trading week with a positive performance. Bank stocks continued to weigh on the markets as concerns over the debt situation in Spain have persisted. The better than expected U.S. retail sales report helped to brighten the mood.

Spain's ten-year borrowing costs increased above 6 percent on Monday ahead of a key debt auction tomorrow, adding to worries over the contagion risk of the sovereign debt crisis and the health of the economy. The 10-year yield went above the crucial 6 percent level for the first time in four months. The yield rose to 6.15 percent, the highest level since December 2011. The cost of insuring Spain's debt hit a record high with the five-year credit default swaps reportedly rising above 510 basis points.

Italian bond yield also moved higher on Monday driven by the concerns over Spain. Meanwhile, the yield on the German 10-year bund hit a record low 1.628 percent as investors flocked to safe-haven debt.

The Euro Stoxx 50 index of eurozone bluechip stocks climbed by 0.70 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, increased by 0.71 percent.

The CAC 40 of France finished up by 0.51 percent and the DAX of Germany climbed by 0.63 percent. The SMI of Switzerland gained 0.87 percent and the FTSE 100 of the U.K. rose by 0.26 percent.

In Frankfurt, Basf climbed by 2.00 percent. HSBC upgraded its rating on the stock to "Overweight" from "Neutral."

Commerzbank fell by 3.59 percent and Deutsche Bank closed lower by 0.56 percent.

Henkel closed higher by 1.79 percent. The company reported the best results in its history in fiscal 2011 and reconfirmed its fiscal 2012 growth forecast, after noting that it had a 'good start' to the year.

Exane BNP reduced Deutsche Telekom to "Neutral" from "Outperform." The stock closed down by 0.08 percent.

Fraport, operator of Frankfurt Airport, reported higher passenger traffic for March, reflecting improved operations. Meanwhile, cargo traffic declined in both periods affected by uncertainties in the global economy and the night flight curfew. The stock declined by 0.21 percent.

In Paris, GDF Suez increased by 2.87 percent. The company's wholly-owned subsidiary Electrabel S.A. has agreed to buy the remaining 30 percent stake that it does not already own in International Power for a sweetened offer of 418 pence per share in cash. International Power rose by 3.19 percent in London.

Societe Generale finished lower by 3.99 percent. BNP Paribas declined by 4.61 percent and Credit Agricole fell by 4.81 percent.

Bouygues climbed by 0.33 percent. Bouygues Construction's unit, Bouygues Bâtiment Île-de-France, has been declared the tender winner for the refurbishment of the celebrated Ritz Hotel, situated in the Place Vendôme in Paris.

Lafarge declined by 2.64 percent. Societe Generale downgraded the stock to "Hold" from "Buy."

In London, Barclays fell by 1.91 percent. Royal Bank of Scotland declined by 3.11 percent and Lloyds Banking Group dropped by 3.40 percent.

Telford Homes surged by 6.19 percent after the company said it expects its profit to beat estimates.

In Zurich, Kuehne & Nagel dropped by 9.49 percent, after the company's first-quarter earnings fell.

Euro area trade balance returned to surplus in February from a deficit in January as exports to countries outside the single-currency bloc continued to rise solidly, the latest figures from Eurostat revealed Monday. The non-seasonally adjusted trade surplus was EUR 2.8 billion in February compared to a revised EUR 7.9 billion deficit in January. Economists had expected a surplus of EUR 3 billion.

U.S. retail sales remained strong in the month of March, according to figures released Monday by the Commerce Department, although the rate of sales growth slowed somewhat from February levels. Advance estimates put the total level of U.S. retail sales at a seasonally adjusted $411.1 billion for March, an increase of 0.8 percent over February levels. While February's retail figures were revised down slightly to show 1 percent growth rather than the 1.1 percent increase initially reported, the March sales growth came in significantly stronger than the 0.3 percent growth predicted by economists.

Homebuilder confidence in the U.S. has shown an unexpected deterioration in the month of April, according to a report released by the National Association of Home Builders on Monday, with the decrease marking the first drop in seven months. The report showed that the NAHB/Wells Fargo Housing Market Index dropped to 25 in April from 28 in March. The decrease surprised economists, who had expected the index to edge up to 29.

U.S. business inventories continued to expand in February according to figures released Monday by the Commerce Department. U.S. business inventories came in at $1.5778 trillion on a seasonally adjusted basis, a 0.6 percent increase over January levels. The result matched the expectations of most economists.

While the Federal Reserve Bank of New York released a report on Monday showing a modest improvement in New York manufacturing activity in the month of April, the index of activity in the sector fell by much more than economists had been anticipating. The New York Fed said its general business conditions index plunged to 6.6 in April from 20.2 in March, although a positive reading indicates an increase in manufacturing activity. Economists had expected the index to edge down to 18.0.

by RTTNews Staff Writer

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