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European Markets Continued Recovery After Spanish Bond Auction

The European markets finished to the upside again Wednesday, extending gains from the previous session. Investors were more optimistic today, following the better than expected Spanish bond auction. The IMF's forecast increase and the stronger than expected German investor confidence result also contributed to the positive mood. Bank stocks rebounded from their recent weakness Wednesday and provided support to the markets.

Spanish borrowing costs continued to rise on Tuesday, as the country paid higher yields at a treasury bill auction, despite strong demand. Though the recent spike in Spanish bond yields has raised the specter of a potential bailout, the mixed reaction to today's bill auction was perceived positively by the markets.

The Treasury raised EUR 3.18 billion from the sale of 12- and 18-month treasury bills. The agency was planning to raise between EUR 2 billion and EUR 3 billion. The yield on the 12-month paper rose to 2.623 percent from 1.418 percent at the previous sale on March 20. The bid-to-cover ratio, however, rose to 2.9 from 2.14.

The International Monetary Fund raised its global growth projections for this year and next on Tuesday, citing improvements in the U.S. economy and emerging economies. However, the Washington-based lender expects growth to be relatively weak, as risks remain elevated, especially from Europe. The IMF raised the growth outlook for 2012 to 3.5 percent from the 3.3 percent predicted in a January update to the WEO report.

The Euro Stoxx 50 index of eurozone bluechip stocks increased by 2.81 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, gained 2.04 percent.

The DAX of Germany rose by 2.65 percent and the CAC 40 of France finished higher by 2.72 percent. The FTSE 100 of the U.K. climbed by 1.78 percent and the SMI of Switzerland closed up by 1.23 percent.

In Frankfurt, Bayer increased by 3.55 percent. The company's subsidiary, Bayer HealthCare, released Xarelto or Rivaroxaban study results, reaffirming the benefits of the oral, once-daily anticoagulant in everyday clinical practice.

Commerzbank climbed by 5.43 percent and Deutsche Bank increased by 4.37 percent.

In Paris, Danone finished higher by 2.91 percent. The French dairy firm reported a 7.6 percent increase in sales for the first-quarter, with growth across all divisions and regions.

Compagnie de Saint Gobain climbed by 6.44 percent. Credit Suisse upgraded its rating on the stock to "Outperform" from "Neutral."

Shares of Societe Generale rose by 8.60 percent. BNP Paribas climbed by 6.86 percent and Credit Agricole gained 7.42 percent.

In London, Rio Tinto climbed by 2.25 percent. The mining giant reported an 11 percent sequential decline in iron ore output for the first quarter, as was widely expected.

Royal Bank Of Scotland increased by 3.83 percent and Lloyds Banking Group climbed by 4.17 percent. Barclays gained 4.63 percent and HSBC rose by 2.36 percent.

Marks & Spencer Group declined by 2.45 percent. The company maintained its full year forecast, but warned that the short term trading outlook continues to be challenging.

Burberry Group sank by 5.93 percent, after the company's revenue numbers came in below expectations.

Eurozone inflation overshot its flash estimate in March due to rising energy prices, final data from Eurostat showed Tuesday. Inflation for March was revised up to 2.7 percent from 2.6 percent. The inflation rate has been 2.7 percent since December 2011.

Investor confidence in Germany improved unexpectedly in April and for a fifth consecutive month, revealing the strong positive sentiment among businesses over the country's economic prospects despite the lingering debt woes. A survey by the Mannheim-based Centre for European Economic Research (ZEW) showed Tuesday that the indicator for economic expectations rose to 23.4 in April, the highest since June 2010, from 22.3 in March. Economists had expected the index to fall to 19.

U.K. inflation increased for the first time in six months in March driven by higher food and clothing prices, denting hopes of another round of quantitative easing. Annual inflation rose unexpectedly to 3.5 percent from 3.4 percent in February, the Office for National Statistics revealed Tuesday. Economists had expected the annual rate to hold steady at 3.4 percent. Inflation continues to hover above the Bank of England's 2 percent target.

New housing construction in the U.S. dipped unexpectedly in the month of March, but an equally unexpected jump in building permits offers hope for the future of the beleaguered housing market. According to figures released Tuesday by the Commerce Department, new privately-owned housing starts came in at a seasonally adjusted annual rate of 654,000 in March, a 5.8 percent drop from February levels.

Additionally, the February figures were revised down slightly from the 698,000 rate initially reported to 694,000. The March rate of new housing starts comes in well below the expectations of most economists, who had predicted a slight uptick to a rate of 700,000.

Industrial production in the U.S. unexpectedly came in unchanged for the second consecutive month in March, according to a report released by the Federal Reserve on Tuesday, with a drop in manufacturing output offsetting a notable increase in utilities output. The report showed that industrial production remained unchanged in March after coming in flat in February. Economists had been expecting production to increase by about 0.3 percent.

by RTT Staff Writer

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