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European Markets Pulled Back As Greece Nears New Elections

The European markets finished to the downside Tuesday. A final round of talks among leaders in Athens has failed to produce a coalition government. As a result, the country will now need to hold a new round of elections. The news had largely been expected, but it raised investor concerns over Italy and Spain.

Meanwhile, Eurogroup President Jean-Claude Juncker dismissed talks on Greece's exit from Eurozone as "propaganda" and said there was "absolutely no discussion" on Greece during Monday's euro area finance ministers' meeting. "Our unshakable desire is to keep Greece in euro," Juncker said after the meeting.

Rating agency Moody's Investors Service on Monday downgraded 26 Italian banks after lowering the credit ratings of the country by a notch in mid-February. Moody's said the ratings for Italian banks are now amongst the lowest in advanced European countries, reflecting the banks' susceptibility to the adverse operating environments in Italy and Europe.

Investors will be watching for the results of the meeting between newly elected French president Francois Hollande and German Chancellor Angela Merkel later today. Everyone is curious how they will overcome differences on tackling the sovereign debt crisis.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 1.18 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, fell by 0.69 percent.

The CAC 40 of France dropped by 0.61 percent and the DAX of Germany finished down by 0.79 percent. The FTSE 100 of the U.K. lost 0.51 percent and the SMI of Switzerland closed down by 0.18 percent.

In Frankfurt, ThyssenKrupp rose by 1.81 percent. The steel giant reported a loss for the second quarter, citing lower price levels and declining volumes resulting from production cutbacks. Citigroup downgraded its rating on the stock to "Neutral" from "Buy."

Salzgitter also turned to a loss from a prior-year profit. The stock finished down by 0.75 percent.

Commerzbank declined by 5.41 percent and Deutsche Bank lost 2.02 percent.

Allianz decreased by 0.87 percent after reporting a higher first-quarter profit.

Merck KgaA fell by 3.05 percent. The company reported a 49 percent decline in first-quarter profit.

Sky Deutschland increased by 8.31 percent after reporting a narrower first-quarter loss.

In Paris, Vivendi rose by 2.01 percent, after reporting first-quarter results.

Societe Generale ended the session lower by 4.24 percent. Credit Agricole fell by 6.97 percent and BNP Paribas lost 2.82 percent.

S&P raised Alcatel Lucent to "Hold" from "Sell." The stock closed down by 1.29 percent.

UBS upgraded Total to "Buy" from "Neutral." The stock dipped by 0.30 percent.

In London, G4S gained 3.15 percent. The security firm said overall revenues in the first quarter grew 7.5 percent at constant exchange rates.

International Consolidated Airlines Group dropped by 5.96 percent. JP Morgan downgraded its rating on the stock to "Neutral" from "Overweight."

Barclays dropped by 1.95 percent and Lloyds Banking Group decreased by 1.79 percent. Royal Bank of Scotland fell by 2.33 percent.

Renishaw surged by 9.40 percent. The precision engineering company said its fourth quarter has started well with activity levels in April ahead of last year. The company sees higher adjusted pre-tax profit for the year.

Babcock International increased by 8.70 percent, after its annual pre-tax profit increased.

In Zurich, UBS raised Holcim to "Buy" from "Neutral." The stock closed up by 0.55 percent.

The German economy expanded more than expected in the first quarter of 2012, data released by the Federal Statistical Office showed Tuesday. Gross domestic product rose 0.5 percent from the prior quarter, when it fell 0.2 percent. Economists had expected only 0.1 percent growth for the first quarter.

The French economy stagnated in the first quarter of 2012 after a modest growth in the fourth quarter of 2011, the statistical office Insee said Tuesday. The gross domestic product recorded no change during the first three months of the year in line with economists' expectations.

The Eurozone economy avoided a recession in the first quarter, flash data from Eurostat showed Tuesday. Gross domestic product for the 17-nation bloc remained flat sequentially after shrinking 0.3 percent in the fourth quarter. Economists were forecasting a 0.2 percent contraction for the first quarter.

Germany's economic sentiment fell more than expected in May, a survey by Mannheim-based Centre for European Economic Research (ZEW) revealed Tuesday. The indicator of economic sentiment fell to 10.8 in May from 23.4 in April. Economists had expected the index to fall to 19.

Retail sales in the U.S. saw a modest increase in the month of April, according to a report released by the Commerce Department on Tuesday, with the increase in sales matching economist estimates. The report showed that retail sales edged up by 0.1 percent in April following a revised 0.7 percent increase in March. Economists had expected sales to increase by 0.1 percent compared to the 0.8 percent growth originally reported for the previous month.

Inflation remained well under control in April, new government figures showed on Tuesday. After a couple months of relatively strong readings, consumer prices stagnated last month, returning to the tame levels seen late last year and the start of this year. The Department of Labor revealed that consumer prices were flat in April compared to the previous month. This matched the expectation of economists, who had predicted no change.

Activity in the New York manufacturing sector has expanded at an accelerated rate in the month of May, according to a report released by the Federal Reserve Bank of New York on Tuesday, with the index of activity in the sector rising by much more than expected. The New York Fed said its general business conditions index jumped to 17.1 in May from 6.6 in April, with a positive reading indicating an increase in regional manufacturing activity. Economists had expected the index to show a more modest increase to a reading of 10.0.

Business inventories in the U.S. rose by slightly less than expected in the month of March, according to a report released by the Commerce Department on Tuesday, although the report also showed a notable increase in business sales. The report showed that business inventories rose by 0.3 percent in March following a 0.6 percent increase in February. Economists had expected inventories to increase by about 0.4 percent.

Homebuilder confidence in the U.S. has seen a significant improvement in the month of May, the National Association of Home Builders revealed in a report on Tuesday, with the index of homebuilder confidence reaching a five-year high. The report showed that the NAHB/Wells Fargo Housing Market Index jumped to 29 in May from a downwardly revised 24 in April. Economists had expected the index to edge up to 26 from the 25 originally reported for the previous month.

by RTT Staff Writer

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