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TheStreet Open House

Royal Bank of Scotland, Lloyds, Banks Buoy Mixed European Stocks

LONDON ( The Deal) -- The European markets were mixed this morning, with London pulled up by its banks -- despite some very ambiguous news from that quarter -- and Paris pulled down by poor results from luxury goods heavyweight LVMH (LVMUY). Gloom in Germany over the crisis in Ukraine was in stark contrast to Britain's joy over economic growth, which seemed to eclipse worries that sanctions against Russia could hurt Britain's huge financial services sector -- and possibly also its biggest oil companies.

The U.K. economy grew by 0.8% last quarter according to government figures, meaning it is now officially larger than before the start of the financial crisis. And the International Monetary Fund predicted Thursday that GDP would grow 3.2% for the year as a whole -- faster than any other advanced economy.

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Majority state-owned Royal Bank of Scotland (RBS) topped the London leaderboard, rising over 15% at one point before sinking back to 372.2 pence, a still-impressive 13.2% above the previous day's close. The Edinburgh bank reported pretax profits for the six months to the end of June would be £2.65 billion -- that's $4.5 billion -- compared with £1.37 billion in the same period last year. Investors also liked the news that impairment losses on bad loans declined by nearly £1.9 billion during the first half of the year, to £269 million.

What's more, the brighter economic environment has sharply reduced the cost of managing and disposing of the assets pushed off into a bad bank last year.

That's the good news, but the market seemed not to hear Royal Bank's warning that what CEO Ross McEwan said were significant conduct and litigation issues might still weigh on earnings in the future.

What's strange is that partly state-backed Lloyds Banking (LYG) also rose on the general tide of goodwill toward banks. That's despite Lloyds' admission that it is in talks with various government agencies about potential settlements involving fines for manipulating the London interbank rate and other benchmarks. The Financial Times reported these could amount to between £200 million and £300 million.

Meanwhile, in the all-important construction sector, infrastructure and services groups Carillion (CIOIF) and Balfour Beatty (BAFBF) said they were in merger talks to create a £3 billion company. Carrillion was up 10.7% at 372.6 pence, while Balfour Beatty was up 9.04% at 253.3 pence.

And in the media, British Sky Broadcasting (BSYBY), or Sky TV, was down 3.78% at 887 pence, after announcing a deal to pay Rupert Murdoch's 21st Century Fox (FOXA) up to £7.4 billion -- or $12.55 billion -- to acquire its German and Italian sister companies. Sky, which is also part-owned by Murdoch, said it wants to create a multinational pay-TV business, with enhanced headroom for growth and immediate benefits of scale.

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In Paris, LVMH, the maker of Louis Vuitton handbags, fell over 7% on poor results, which weighed on luxury goods rivals across the sector.

In London, the FTSE100 was up 0.03% at 6,823.20. In Paris the CAC40 was off 0.59% at 4,384.55 and in Frankfurt, the DAX was down 0.28% at 9,767.02. Moscow's MICEX index was down 1.19%, after three days in positive territory at 1,392.1. Japan's Nikkei225 closed up 1.13% at 15,457.87.

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