LONDON (ShareCast) - - French short term and long term debt yields drop.

- Travel and leisure stocks hit by Costa Concordia incident.

- Automobile shares rise on Goldman recommendation.

FTSE -100: +0.37%

Dax-30: +1.25%

Cac-40: +0.89%

Stoxx 600: +0.80%

Ibex 35: -0.01%

European stocks closed higher on Monday after France managed to sell €1.895bn in one year bonds at reduced interest rates.

European investors awoke this morning in the wake of Standard and Poor’s decision to downgrade France's credit rating, after the close of trading on Friday.

Stocks gained steadily from mid-morning after an auction of French debt saw the country shift €8.59bn worth of bonds.

The average yield on one year debt came in at 0.406% versus the 0.454% seen at the last auction of this type. Despite the S&P downgrade, investors seem to believe the risk on French debt has not materially increased.

In other news, the European Central Bank is thought to have been in the market today supporting the bonds of Eurozone countries.

Italian 10 year yields had dropped 2 basis points by 5:55pm in Italy, possibly as a result of this action.

But Europe is by no means out of the woods. Another ratings agency, Moody’s, has said that it will provide an update on the ‘outlook’ for France’s sovereign debt in the first quarter of this year. In theory some of the greatest damage to Eurozone bonds could come if a second agency were to confirm S&P's evaluation.

EU bureaucrats had indicated the single currency area might be able to agree on a new, stricter budget rule book by the end of January.

Worth noting,a meeting between Italian Prime Minister Mario Monti, French President Nicolas Sarkozy and German Chancellor Angela Merkel was postponed from January 20th to the end of February, apparently so that the French leader can concentrate on his ´home front.´

SECTORS

The best performers on the DJ Stoxx 600 were: automobiles & parts (+3.07%), technology (+1.89%) and basic resources (+0.95%).

The biggest faller, by far, was travel & leisure ,which dropped 1.08% on the back of the fall in the share price of Carnival PLC, the owners of the ill-fated Costa Concordia cruise ship.


COMPANIES

Shares in Carnival plummeted as investors took a view on the impact of the Costa Concordia running aground in Italy, with the deaths of six passengers.

The firm said it would lose between $85 - $95m in revenues from not having the ship in operation. It also said insurance deductibles could amount to $40m. The stock closed down 16.5% in London.

Some of the biggest movers today were automobile manufacturers, following a strong note on the sector from analysts at Goldman Sachs.

In Paris Peugeot (+4.2%), Michelin (+3.7%) and Renault (+2.9%) all gained heavily. In Italy Pirelli (+4.9%) followed suit.


MACROECONOMY

German wholesale prices remained flat month-on-month in December, following a 0.7% rise in November.

OTHER MARKETS

The Euro/dollar fell by 0.09% to 1.2674 dollars by 6:28pm.

Front month Brent crude futures moved up by 0.63% to hit $111.14 per barrel by 5:40pm in London.

BS

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