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European Markets Bounced Back From Yesterday's Sell-Off

The European markets finished in the green Wednesday, rebounding from the weakness of the previous trading session. Tuesday's decline was driven by the uncertainty created by the early results of the Italian parliamentary elections, which showed that no single party or coalition has secured enough seats to form a government on their own.

The markets recovered after U.S. Federal Reserve Chairman Ben Bernanke downplayed speculation that the central bank is getting ready to end its controversial quantitative easing program. In semi-annual testimony before the U.S. Senate Banking Committee, Bernanke said the Fed's $85 billion/month asset-buying program is needed to preserve a nascent housing recovery and modest improvement in the jobs market.

Investors are continuing to watch Bernanke during his second day of testimony on Wednesday, this time before the House Financial Services Committee.

Italy's borrowing costs surged at a bond auction on Wednesday as the inconclusive election results led to concerns that political instability could derail the country's efforts to tackle its huge debt and help the economy out of a recession.

The Rome-based Treasury sold EUR 4 billion of 10-year bonds, in line with the target set for the sale, which saw the cost of borrowing soar to a four-month high despite strong demand.

The yield on the May 2023 bond rose to 4.83 percent from 4.17 percent fetched at a January 30 sale. The yield is the highest since October last year. The bid-to-cover ratio, which reflects investor demand, climbed to 1.65 from 1.32.

The agency also sold EUR 2.5 billion of 5-year bonds, matching the maximum target set for the sale. The November 2017 bond fetched a yield of 3.59 percent, which was much higher than the 2.94 percent paid on January 30. The demand was 1.61 times the offer compared to 1.30 times at the previous sale.

The Euro Stoxx 50 index of eurozone bluechip stocks increased by 1.59 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.91 percent.

The DAX of Germany climbed by 1.04 percent and the CAC 40 of France advanced by 1.92 percent. The FTSE 100 of the U.K. rose by 1.03 percent and the SMI of Switzerland gained 0.47 percent.

In Frankfurt, Commerzbank increased by 1.21 percent and Deutsche Bank added 1.44 percent.

Salzgitter, which reported annual loss, advanced by 6.04 percent.

MorphoSys declined by 6.39 percent, after Commerzbank reduced its rating on the stock.

In Paris, Bouygues surged by 13.23 percent after reporting financial results.

EADS climbed by 6.53 percent. The Airbus maker reported increased profit for the year and said it expects higher earnings in 2013.

BNP Paribas rose by 3.56 percent, while Societe Generale gained 3.46 percent.

In London, Petrofac dropped by 6.26 percent. The company reported a 17.2 percent increase in 2012 profit and hiked its dividend.

HSBC climbed by 1.89 percent, after Investec Securities upgraded its rating to "Add" from "Hold." Royal Bank of Scotland increased by 2.15 percent and Barclays added 1.62 percent.

Robert Walters fell by 0.97 percent, after Berenberg upgraded its rating on the stock.

Serco Group lost 0.70 percent, after a broker downgrade.

Bwin.party surged by 8.85 percent. Citigroup upgraded the stock to ''Neutral'' from ''Sell.''

ITV fell by 1.00 percent. The company reported financial results.

Holcim increased by 3.20 percent in Zurich. The company reported a narrower loss for the fourth quarter.

Eurozone economic confidence climbed to a 9-month high in February by the virtue of its fourth consecutive monthly improvement, boosting expectations of a trend reversal in the bloc. Nevertheless, inconclusive Italian election remains a potential risk.

The economic sentiment index came in at 91.1, up from a revised 89.5 in the prior month and was also above the consensus forecast of 89.9, the results of a survey by the European Commission showed Wednesday.

A leading indicator of the Eurozone economy increased for the third consecutive month in January, indicating that stabilizing financial conditions are having a positive effect on the economic outlook, preliminary data from a survey by the Conference Board showed Wednesday.

The leading economic index increased 1 percent month-on-month to 106.2 in January, after rising 0.3 percent in December and 0.6 percent in the month prior to that.

Confidence among German households is set to improve for the second straight month in March, with expectations turning more optimistic as the financial crisis in the euro area is calming down, fueling hopes that recovery will gather momentum in the early months of the year, a monthly survey revealed Wednesday.

The results of a forward-looking survey by the GfK showed that the consumer confidence index based on the survey will rise to 5.9 in March from 5.8 in February, marking the second consecutive monthly growth. The projected figure matched economists' forecast.

German import prices declined for the first time in three years in January, data from the Federal Statistical Office showed Wednesday. The import price index fell 0.8 percent year-on-year in January, following a 0.3 percent increase in the previous month. Economists expected a 0.4 percent decline.

Confidence among French consumers remained unchanged in February, data from the statistical office Insee showed Wednesday. The headline synthetic index scored 86 in February, unchanged from January and December. The index reading was in line with economists' forecast but remained below its long term average.

Unemployment in France increased further in January, the latest figures from the labor ministry showed Tuesday. The number of job seekers in class A totaled 3,169,300 last month. This represented an increase of 1.4 percent or 43,900 workers compared to December 2012. Year-on-year, the number of job seekers in this category rose 10.7 percent.

The British economy contracted 0.3 percent quarter-on-quarter in the fourth quarter, unrevised from the previous estimate, the latest figures from the Office for National Statistics showed Wednesday. The third quarter GDP figures were revised up to show a 1 percent growth for the period compared to 0.9 percent growth reported initially.

Data released Wednesday by the Office for National Statistics showed that the U.K.'s index of services decreased marginally in December after staying flat in the previous month. The seasonally adjusted index of services decreased 0.4 percent month-on-month in December, while economists expected the index to remain flat. In November, the index had stayed unchanged month-on-month.

While the Commerce Department released a report on Wednesday showing that new orders for U.S. manufactured durable goods fell by more than expected in the month of January, orders actually rose by much more than expected when excluding orders for transportation equipment.

The report said durable goods orders tumbled by 5.2 percent in January after jumping by a revised 3.7 percent in December. Economists had expected orders to fall by 4.0 percent compared to the 4.3 percent increase that had been reported for the previous month.

Pending home sales in the U.S. rebounded by more than expected in the month of January, according to a report released by the National Association of Realtors on Wednesday. NAR said its pending home sales index rose by 4.5 percent to 105.9 in January after falling by 1.9 percent to 101.3 in December. Economists had expected the index to increase by 3.0 percent.

by RTT Staff Writer

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