Milan leads Europe-wide rally as stocks hit new highs

Positive retail data and a jump in the Dow help

Milan leads Europe-wide rally as stocks hit new highs

Milan, March 5 - European stocks reached four-and-a-half-year highs Tuesday boosted by positive retail sales data and a surge in US equities, which jumped after a measure of service sector activity topped expectations and the Dow beat its October 2007 record levels. Milan's FTSE-MIB led gains among Europe's main bourses, closing up 2.8% at 15,974.3, followed by Madrid's IBEX 35, which gained 2.2% at 8,423.3. Frankfurt's DAX and Paris's CAC 40 also put in strong gains Tuesday, closing up, respectively, 2.3% (at 7,870.3) and 2.1% (at 3,787.2. London's FTSE-100 trailed with a more modest +1.4% close, at 6432. European retail sales data for January, which showed a 1.2% increase on the year-ago figure, came in above expectations, boosting investor confidence ahead of a European Central Bank rate setting meeting scheduled for Thursday. Milan's rally was in part sustained by the strong performance of oil-services giant Saipem, which gained just over 8% after Goldman Sachs raised its view on the stock to ''buy'' and inserted it into its "conviction buy" list with a 27 euro target price. Saipem closed at 21.4 euros. The generally positive investor mood helped generate gains also for industrials like Fiat (+5.9%) and banks, lead by Mediobanca (+6.2%) and Intesa Sanpaolo (+4.5%) as well as insurer Generali (+4.5%). Not all stocks posted gains Tuesday, with Ansaldo STS shedding 1.4% after giving out its 2012 results. Highways operator Atlantia closed 1.4% lower while Banco Popolare lost 2.7% after issuing a profit warning. Meanwhile the spread between Italy's 10-year government bonds and their German counterparts - a key indicator in investor confidence in Italy - ended the day at 328 basis points, down from Monday's close at 346 basis points. However some analysts pointed to a narrowing of the spread gap with Spain as an indicator that investors in Italian government paper are beginning to express some worries about the impact of a protracted political impasse in Italy following last week's inconclusive general elections.

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