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. Last Updated: 07/27/2016

European Stocks Set New Highs

LONDON -- European shares pushed to record highs Monday, led up by soaring German banking and financial stocks while the euro remained steady against the dollar in holiday-thinned trade.

The yen also stayed firm against the dollar despite last week's surprise yen-selling intervention by the Bank of Japan to curb yen strength.

European government debt futures started lower after German producer prices showed a 0.1 percent rise in November and 0.7 percent annual increase.

Blue chip indices in Germany, Paris, Madrid and Milan tested record highs. Banks and insurance stocks led the way but gains in telecoms and technology stocks also bolstered overall gains.

British stock markets are closed for the Christmas holiday until Wednesday. London's gold and metals markets are also closed until then.

Early Monday, the pan-European Eurotop index of 300 shares was up 11.2 points or 0.72 percent at 1556.7 while the narrower Euro Stoxx index of 50 blue-chip euro zone shares was up 63.98 points or 1.34 percent at 4845.14. Both tested new highs.

Among leading European indices, Frankfurt's DAX was up 2.4 percent, and Paris's CAC-40 was up 0.8 percent.

German banking and financial sector stocks rose strongly, extending their rally from last week after the government proposed scrapping a tax on the sale of domestic shareholdings by one company to another.

Deutsche Bank led the gainers, rising 11 percent while Allianz gained 5 percent. Both stand to gain from the government's tax reform as they have large holdings in other companies.

German telecoms and engineering group Mannesmannn AG on Sunday denied a newspaper report that it was open to a friendly bid to fend off the hostile takeover by Britain's Vodafone Airtouch PLC.

The Sunday Business newspaper said that potential bidders for Mannesmann included British Telecom, U.S. telecoms groups MCI WorldCom and BellSouth Corp and French conglomerate Vivendi.

Mannesmann shares eased 0.1 percent.

Swiss shares rose in thin trade with focus on speculation that Zurich Financial Services could bid for British Royal & Sun Alliance. Zurich Financial shares rose 1.8 percent.

The dollar remained soft against the yen Monday, its sentiment undermined by its inability to sustain gains after a spike-up late last week on the Bank of Japan's surprise yen-selling intervention.

Activity was subdued amid British bank holidays through Tuesday, and traders said there was little interest at this point in the year to pick a bottom in dollar/yen, which had yet to convince the market it had halted its longer-term downtrend.

Still, lingering wariness of further BOJ action kept the dollar eroding below 102.50 yen for now. Traders said seeing if the dollar could bounce back above post-intervention peaks above 103 could be crucial in the near term.