- US debt ceiling concerns continue to weigh heavy on stocks
- Report says Germany's economy contracted in fourth quarter of 2012
- Goldman Sachs pulls out of bank bonus delay plans

European equities dragged Tuesday as US debt concerns continued and a report showed Germany's economy had contracted in the fourth quarter of 2012.

President Barack Obama has warned Republicans to avoid the need for a debt-limit increase to force through new spending cuts.

He said markets could go "haywire" if there was another confrontation over borrowing.

Ratings agency Fitch said a delay in increasing the debt limit could put the country's triple A rating at risk. Fitch also indicated that it does not expect Spain to petition the European Stability Mechanism (ESM) for a rescue this year.

Spain sold €5.75bn of bills Tuesday, exceeding its upper goal of €5.5bn, Bloomberg reported. The Treasury traded 12-month bills at an average 1.472%, compared with 2.556% on December 2011 and sold 18-month debt at 1.687%, down from 2.778%.

Europe's markets were also impacted by a report from the Federal Statistics Office in Wiesbaden which said Germany's economy grew 0.7% last year, down from 3% in 2011.

It implied a contraction of about 0.05% in the final quarter and signalled that the country had finally succumbed to the financial woes affecting the rest of the Eurozone.

A 4.1% fall in company investments in plant and machinery over the year caused the German economy to contract, it said.

However, most economists remain optimistic that Germany will quickly recover this year.

Goldman backs out of bank bonus delay

Goldman Sachs pulled out of plans to defer bonuses to allow its top bankers to avoid the highest rate of tax following criticism from Bank of England Governor Sir Mervyn King.

King, who will stand down as Bank of England Governor in June, told the Treasury Select Committee that plans to delay paying out bonuses to help bankers avoid the 50p tax rate were 'depressing'.

"I find it a bit depressing that people who earn so much seem to think it's even more exciting to kind of adjust the timing of it to get the benefit of a lower tax rate which they will benefit from in the long run to a very great extent," he was cited as saying.

The Goldman committee had planned to defer parts of bonuses from 2009, 2010 and 2011 until after April 6th when the top rate of income tax will fall from 50% to 45%.

Germany's SAP falls

German software company SAP fell 4.1% as it reported earnings trailing analysts' estimates.

H&M climbed 3.6% to 228.20 kronor as the European clothing retailer unveiled an increase in sales.

IG Group Holdings, owner of the IG Index financial spread-betting brand, fll 1% after reporting a drop in first half net trading.

Hennes & Mauritz jumped 3.6% after releasing sales figures that exceeded the estimates of analysts.

Burberry Group gained 4.6% as the luxury-goods company said third-quarter revenue increased 7% to £613m.

Finnish drug maker Orion Oyj slid 4.2% after Jefferies International said the stock was overvalued following a 42% increase during the second half of last year.

Euro/dollar slides

The euro/dollar was down 0.31% to the 1.3341 dollar level.

Front month Brent crude futures fell by 0,630 dollars to the 111.180 mark on the ICE.

RD

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