The European markets rose for the third day on Tuesday, as banking stocks rallied following strong earnings from Goldman Sachs and mining stocks gained on firmer metals prices.

In economic news, the U.S. Labor Department said producer prices dropped 1.2% in March following a 0.1% increase in the previous month. Economists had expected no change in producer prices for the month. Core prices, a measure that excludes the volatile food and energy sectors, were flat compared with the previous month.

The U.S. Commerce Department said in its report that retail sales fell 1.1% in March following a revised 0.3% increase in February. Economists had expected sales to increase by 0.3% compared to the 0.1% decrease originally reported for the previous month.

Crude oil prices fluctuated on Tuesday, as traders continued to look for signs that either the economy is stabilizing and will push up demand for crude or that the glut of oil around the globe will continue to hold down prices. Crude for May delivery rose $0.08 to $50.13 a barrel on the New York Mercantile exchange, by the time the European markets closed.

The FTSEurofirst 300 index of pan-European blue chips closed 1.49% higher at 789.95 points, while the narrower DJ Stoxx 50 index rose 1.34% to 1,943.40 points.

Around Europe, the U.K.'s FTSE 100 index rose 0.13% to 3,988.99, while the narrower DJ Stoxx 50 index surged up 0.88% to 3,000.22 and Germany's DAX index climbed 1.47% to 4,557.01.

Banking stocks rallied, as strong first quarter results from Goldman Sachs raised optimism that that the worst of the credit crisis is over. Barclays, Britain's third largest bank, climbed 10.15, while UBS, Switzerland's second largest bank, surged up 15.4% and BNP Paribas, France's biggest lender, rose 8.9%. Deutsche Bank, Germany's largest bank, gained 4.7%.

Mining stocks rose, tracking metals prices. BHP Billiton, the world's biggest miner, rose 2.6%, while Anglo American, the second biggest, surged up 3.4% and Rio Tinto, the third biggest, climbed 5.9%. Copper miner Antofagasta rallied 5.9%.

Philips, Europe's largest maker of consumer electronics, rose 3.3% after the company said it would accelerate measures to cut costs as it reported a first quarter net loss of ?59 million.

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