European Markets Pause

European equity markets started the week cautiously after a particularly strong session on Friday, during which the Dow Jones Industrial Average was pushed to a high of more than five years.

The DJIA rose 1.1%, to 14,009.79 on Friday, climbing above 14,000 for the first time since Oct. 12, 2007. As a result, most traders expected equities, in particular, to pause for breath on Monday. The euro dipped against the dollar and the British pound in early trading, while stocks, oil and gold prices were mixed within a tight range.

Spanish and Italian government bond yields pushed higher due to political concerns in Spain. Corruption allegations emerged last week against Spain's governing party, bringing the recent improvement in sentiment to a halt in euro-zone debt markets. "The weekend news flow served as a timely reminder of the political risks looming on the European horizon," said Deutsche Bank .

Spanish Prime Minister Mariano Rajoy moved to contain a scandal over alleged cash payments to him and other leaders of his party by promising to disclose his tax returns and financial assets. But this didn't stop protesters from taking to the streets on Saturday in Madrid, Barcelona and other cities in Spain.

Adding to Spain's woes, the number of people out of work there rose 2.7% on the month in January, according to data released on Monday. The currency bloc's No. 4 economy is failing to curb rising jobless claims. Last month, the country's statistics institute said 26% of Spain's working-age population was unemployed at the end of December�the second-highest unemployment rate in the euro zone, after Greece.

In stocks news, Swatch Group AG shares surged following well-received earnings. The world's largest watchmaker by sales reported a 26% increase in full-year net profit for 2012.

Julius Baer Gruppe AG shares dropped after the Swiss private bank reported its full-year results. Assets under management increased 11%, but some analysts said its rising cost base was a concern.

In the U.K., the banking sector trod water ahead of a speech by Treasury chief George Osborne. He is expected to announce draft legislation on "ring-fencing" within the industry and to warn that banks could be broken up if they fail to separate their retail and investment arms.

The U.K. construction purchasing manager's index, euro-zone producer prices and U.S. factory orders are scheduled for release on Monday.

Write to Andrea Tryphonides at andrea.tryphonides@dowjones.com