The European markets have ended Tuesday's session in positive territory. Concerns over the situation in Greece have eased following the second round of elections over the weekend. As Greece makes its second attempt to put together a coalition government, concerns over the situation in Spain have flared up.
One factor that has contributed strongly to today's rally is investor optimism that Wednesday's FOMC meeting announcement will result in further stimulus. The hope seems to be that if that does indeed take place, then perhaps the ECB and the BoE will also come through with additional stimulus measures.
Spain raised the maximum target amount at a debt auction but at a higher cost than a month ago as the country's 10-year benchmark yield remained above 7 percent, a euro-era record widely seen as unsustainable, amid concerns that the country may be forced to seek a bailout.
The Bank of Spain extended the time period for the completion of banks' audit report, to September from July 31, Spain's financial daily Expansion reported Tuesday.
Standard & Poor's on Tuesday said that the short-term risk of Greece leaving the Eurozone may have lessened. However, there remains at least a one-in-three chance of its exit in the medium-to-long term.
The International Monetary Fund on Monday urged Europe to focus on reviving economic growth to help the recovery of the region's crisis-hit economies. A paper published by IMF staff observed that Europe needs to revive economic growth to help break the vicious cycle of the feedback loop, between weak government finances, weak banks and weak growth that continually undermine each other.
Elsewhere, the Group of Twenty nations, during Monday's meeting at Los Cabos in Mexico, called for more efforts by Europe to contain the debt crisis. Meanwhile, the BRICS nations vowed to step up their contribution to the International Monetary Fund to support Europe fight the turmoil.
Eurozone members should "take all necessary policy measures" to safeguard the stability of the single currency bloc, reports said citing the G20 draft communiqué, to be released at the end of the G20 meeting on Tuesday.
The Euro Stoxx 50 index of eurozone bluechip stocks gained 1.87 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, is added 1.56 percent.
The DAX of Germany climbed by 1.84 percent and the CAC 40 of France finished higher by 1.69 percent. The FTSE 100 of the U.K. rose by 1.73 percent and the SMI of Switzerland increased by 1.61 percent.
In Frankfurt, Fraport rose by 3.38 percent. JPMorgan upgraded its rating on the stock to "Overweight" from "Neutral."
Commerzbank increased by 3.54 percent and Deutsche Bank gained 1.62 percent.
Gea Group closed higher by 4.02 percent. Commerzbank upgraded the stock to 'Buy" from "Hold."
Heidelberger Druckmaschinen fell by 0.91 percent. The stock was cut to "Hold" from "Sell" at S&P Equity.
In Paris, Danone sank by 6.04 percent. The dairy giant slashed its operating margin target for 2012, citing steeper-than-anticipated demand deterioration in Southern Europe, particularly in Spain, and escalating costs.
Societe Generale rose by 2.70 percent, after Morgan Stanley downgraded the stock to "Equalweight." BNP Paribas closed up by 2.70 percent and Credit Agricole added 3.37 percent.
In London, Hammerson increased by 2.56 percent. Brookfield Office Properties Inc. has agreed to buy a portfolio of premier office buildings and a development site in the London financial district from Hammerson for 518 million pounds or $829 million.
Home Retail surged by 23.54 percent. The home and general merchandise retailer said it is comfortable with current market expectations for full-year profit.
Weir Group rose by 4.59 percent, after confirming its full year guidance.
Barclays climbed by 2.32 percent and HSBC increased by 2.52 percent. Royal Bank of Scotland gained 3.40 percent and Lloyds Banking Group finished higher by 2.45 percent.
Whitbread gained 6.27 percent. The company reported a 14 percent increase in first-quarter sales.
Kentz said it continues to trade strongly in line with the revised guidance provided in May. The stock finished up by 12.34 percent.
Wynnstay Properties sank by 9.26 percent, after reporting a drop in full year profit.
Chemring reported lower profit for the first half of the year and the stock decreased by 9.25 percent.
Imagination Technologies dropped by 5.95 percent, after reporting full year results.
Construction output in the euro area decreased in April, after returning to growth in the previous month, data released by statistical office Eurostat showed Tuesday. Construction output decreased a seasonally adjusted 2.7 percent on a monthly basis in April, reversing the previous month's 11.4 percent increase, which came after three successive contractions. In EU27, output decreased 6.6 percent month-on-month.
German economic sentiment deteriorated at the sharpest pace since October 1998 in June, as the debt crisis started to wear away investors' expectations over the prospects of Eurozone's largest economy. The ZEW Indicator of Economic Sentiment for Germany decreased by 27.7 points to minus 16.9 points in June. It was the indicator's strongest decline since October 1998. The score was also much worse than economists' forecast of 2.3.
French business sentiment dropped slightly to 92 in June from 93 a month ago, the statistical office Insee said Tuesday. The reading matched economists' expectations.
U.K. annual inflation fell unexpectedly in May to the lowest level since November 2009, raising hopes that more policymakers will support additional stimulus at the upcoming rate-setting session. Driven by lower food and fuel prices, inflation eased to 2.8 percent in May, figures published by the Office for National Office revealed Tuesday. Economists had expected the rate to remain unchanged at April's 3 percent.
U.S. housing starts dipped in May, nearly reversing a stronger than initially reported April rebound, according to figures released Tuesday by the Commerce Department. The number of privately owned housing starts at a seasonally adjusted annual rate of 708,000 for May.
While the May figure is 4.8 percent below the revised April estimate of 744,000, revised figures put the April rate notably higher than the 717,000 initially reported. The revised figures put April housing starts at the highest level since October of 2008. Nevertheless, most economists had expected to see at least a small continuation of the growth in May, forecasting an annual rate of housing starts at 720,000.
by RTT Staff Writer
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