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European Markets Recovered After U.S. Consumer Sentiment Report

The European markets bounced back from early losses on Friday, following the better than expected U.S. consumer sentiment report for May. The positive report and the subsequent rally in the U.S. stock markets helped Europe to shrug off some negative news.

Financial stocks were weak in early trade, following Thursday's unexpected announcement from JP Morgan. The Spanish government also announced some reforms to its banks on Friday, which will force the banks to raise more capital. Mining stocks were dragged lower by some weaker than expected economic data from China. Investors continue to watch the situation in Greece, where efforts continue to put together a coalition government.

JP Morgan announced Thursday that its Chief Investment Office has had hefty mark-to-market losses in its synthetic credit portfolio since March 31, 2012, that have proven to be more riskier than expected. JPMorgan said it now estimates its Corporate business, within the Corporate/Private Equity segment, to incur a net loss of about $800 million.

The Eurozone has entered a technical recession, but the recovery is in sight, the European Commission said in its Spring forecast. A gradual recovery is forecast to begin in the second half of the year and gather momentum in 2013. However, downside risks to the GDP forecast continue to prevail.

The economy is forecast to shrink 0.3 percent this year, in line with the February interim forecast. But it reflects a downward revision from the Autumn forecast of 0.5 percent growth. In 2013, the 17-nation bloc is expected to expand 1 percent.

China's retail sales growth slowed more than expected in April, the latest report from the National Bureau of Statistics showed Friday. Retail sales increased 14.1 percent year-on-year in April, slower than 15.2 percent increase in March. Economists had forecast the rate of growth to edge down to 15.1 percent.

China's industrial output growth slowed unexpectedly in April, the latest figures from the National Bureau of Statistics showed Friday. Total production of the Chinese industrial sector grew 9.3 percent from a year earlier in April. Economists had expected the rate of growth to accelerate to 12.2 percent from 11.9 percent from March.

The Euro Stoxx 50 index of eurozone bluechip stocks gained 0.28 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, closed higher by 0.37 percent.

The DAX of Germany increased by 0.95 percent, but the CAC 40 of France finished down by 0.01 percent. The FTSE 100 of the U.K. rose by 0.57 percent and the SMI of Switzerland climbed by 0.48 percent.

In Frankfurt, E.ON finished higher by 0.89 percent. S&P Equity upgraded its rating on the stock to "Buy" from "Hold."

Fresenius rose by 0.39 percent, after the company successfully completed a capital increase.

Shares of Volkswagen finished higher by 2.31 percent. Daimler gained 2.41 percent and BMW rose by 1.80.

In Paris, pipe maker Vallourec plunged by 19.99 percent. The company reported a lower profit for the first quarter and reduced its sales forecast for the full year.

Credit Agricole announced that its first-quarter profit fell on Greece-related charges. The stock finished down by 1.00 percent.

Axa declined by 1.86 percent. The insurer reported higher revenues in the first quarter.

Renault climbed by 5.00 percent after Nissan said it expects a boost in profit fuelled by growth in China and the U.S. Peugeot finished up by 0.32 percent.

In London, Barclays initiated Eurasian Natural Resources with an "Underweight" rating. The stock declined by 4.00 percent.

Marks & Spencer Group increased by 3.48 percent. Bank of America upgraded its rating on the stock to "Buy" from "Neutral."

Planetpayment dropped by 5.77 percent. The company reported higher profit and revenue for the first quarter.

SnackTime sank by 10.00 percent. The company expects full-year revenue in line with expectations and EBITDA pre-exceptionals slightly below view.

Sainsbury gained 1.94 percent, after Citigroup raised the stock to "Neutral" from "Sell."

International Consolidated Airlines climbed by 1.47 percent. After reporting a deeper pre-tax loss, the airline expects its operating result to be around breakeven for the full year.

U.K. factory gate inflation slowed less than expected in April, while input price growth eased at a faster-than-expected rate, data from the Office for National Statistics revealed Friday. The output price inflation slowed to a twenty-eight month low of 3.3 percent from an upwardly revised 3.7 percent in March. Previously, the rate was lower in December 2009, when the index rose 3.2 percent, the statistical office said. The inflation rate was still above economists' forecast of 2.9 percent.

The output price index for home sales of manufactured products rose 0.7 percent month-on-month, faster than the 0.6 percent gain in March. Economists had expected the rate of increase to slow to 0.4 percent.

With energy prices showing a notable decrease in the month of April, the Labor Department released a report on Friday showing an unexpected drop in producer prices for the month. The Labor Department said its producer price index fell by 0.2 percent in April after coming in unchanged in March. Economists had expected the index to remain flat for the second straight month.

Consumer sentiment in the U.S. has unexpectedly seen a continued improvement in the month of May, according to a report released by Reuters and the University of Michigan on Friday, with their consumer sentiment index jumping to a four-year high. The report showed that the consumer sentiment index for May rose to 77.8 from the final April reading of 76.4. The increase came as a surprise to economists, who had expected the index to edge down to 76.2.

by RTTNews Staff Writer

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