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Pressures on Europe mount

Markets remained soured on Europe this morning, driving Greece's borrowing costs to new heights and spreading the pain to Portugal, where the cost of insuring sovereign debt also hit record levels. Despite Greece's decision Friday to formally ask the EU and the International Monetary Fund for a bailout that could run to €45-billion, investors want details and timing.

"The Greek crisis has started to spread to the rest of the periphery and Portugal seems to be next in line," Alliance Bernstein senior economist Darren Williams told the Reuters news agency. "The situation there is less urgent than in Greece but the medium-term outlook is challenging. Unless Europe's leaders can draw a line under the situation, Portugal could face an uncomfortable period."

Markets have been closely watching for German reaction, as well, given that sentiment is running high against a bailout for Greece, and the country is heading into regional elections. Chancellor Angela Merkel today tried to ease concerns but added Greece must come up with a workable plan to cut its crippling debt.

Added Scotia Capital currency strategist Camilla Sutton: "The Greek crisis is being played out in many ways, but there are two notably important market reactions for [foreign exchange]players. The first is that contagion fears are pushing up credit risk for the weaker members and therefore driving yields higher ... The second important reaction is that there is fear that current issues will dampen growth and inflation and will therefore result with looser monetary policy for longer, combined with a surge of risk aversion-driven cash seeking 'safer' bond markets than the weaker EU members. Accordingly, there is downward pressure on bond yields in Germany, France, Norway, Switzerland, Sweden, Finland and Denmark."

Read the story

Related: Tough talk fuels doubts over Greek rescue plan

Audio: Eric Reguly on what the party's over for Greece

Luxury home sales rebound

Sales of luxury homes in Canada have rebounded to record heights, driven by the economic recovery, immigration and foreign investment, a new study says. Prices have also surged as sales rose, the first-quarter study by ReMax Canada said. "With the exception of Toronto, buyers could be relatively particular and take their time in making decisions as balanced conditions characterized markets across the board," the company said. "Given adequate supply, prices are likely to hold steady or experience modest increases in the majority of markets in 2010." Read the story

Should analysts be more upbeat?

Investors in Canadian stocks are beginning to reap the rewards of the earnings recovery.

As shareholders prepare for the first truly hectic week of the quarterly reporting season in Canada, CIBC World Markets notes that estimates point to a 45-per-cent gain among TSX companies, given stronger economic growth, firmer resource prices and the fact that earnings are coming off weak levels of a year ago. That would mark the fastest year-over-year rise since the first quarter of 2003.

"Although two sectors - materials and financials - will account for three quarters of the year-to-year increase in dollar earnings, nine of 10 sectors should show improvement," CIBC's Peter Buchanan and Meny Grauman said in a research note. "Nearly a fifth of all dividend announcements since the start of the year have provided enriched payouts compared to 11 per cent in the fourth quarter, and share buybacks are also rising - both signs that shareholders are starting to benefit from the earnings recovery."

Mr. Buchanan and Mr. Grauman also pointed out that the better-than-expected results among S&P 500 companies hasn't bolstered the confidence of some analysts watching Canadian earnings. "Although TSX [first-quarter]earnings are expected to be the strongest in seven years, recently as many analysts have cut their estimates as have raised them," they said. "All this suggests that current [earnings-per-share]projections for the TSX composite are on the conservative side, leaving some potential for upside surprises as we head into a heavy week for earnings announcements."

Related: Dollar's rise a good thing for TSX earnings

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