* S&P ends at record closing high * Euro edges up from 4-month low vs U.S. dollar * European shares rebound as Cyprus tensions ease * Trading subdued before Easter holiday weekend By Ellen Freilich NEW YORK, March 28 (Reuters) - The benchmark S&P 500 stock index set a record closing high while the euro rose from a four-month low as banks in Cyprus reopened to relative calm on Thursday after the island's controversial bailout that taxed large depositors. Stocks rose on Wall Street, the S&P closing at 1,569.19, surpassing the previous record high on Oct (KOSDAQ: 039200.KQ - news) . 9, 2007. The market for riskier assets got a lift when the mass panic some feared would ensue when banks reopened in Cyprus after a forced closure lasting nearly two weeks did not occur. The banks opened with tight capital controls in place to keep depositors from withdrawing all their money. "Banks had a fairly orderly opening in Cyprus and German consumer spending was positived," said Quincy Krosby, market strategist at Prudential Financial (NYSE: PHR - news) in Newark, with more than $1 trillion in assets under management. "That set the tone that allowed European markets to climb which set the stage for the S&P 500 to climb to a new high in intraday trading, despite the fact that much of the U.S. economic data that came out today was below consensus expectations." The euro rebounded from a recent four-month low against the dollar as month- and quarter-end flows had investors covering bets against the euro. But the euro lost ground during the quarter and analysts saw Thursday's move up as tenuous. Analysts worry the Cyprus crisis and political concerns in Italy could encourage anxious investors to sell euro zone assets and seek the safety of the U.S. dollar. While investors "breathed a sigh of relief that the world didn't end when Cyprus reopened its banks, the concern is we are five years into the euro zone crisis and still lurching from crisis to crisis," said Patrick Chovanec, chief strategist at Silvercrest Asset Management Group in New York, which has $11.5 billion in assets under management. "These economies need to grow their way out of debt and the question is where will the growth come from?" Cyprus's 10 billion euro rescue deal with its European partners at the weekend is the first euro zone bailout to impose losses on bank depositors and has raised the prospect of savers withdrawing money from banks. The decision to include senior debt holders and large depositors in the Cyprus bailout could have a "lasting effect" on the way investors perceive weaker euro area banks, said Barclays (LSE: BARC.L - news) analysts Rajiv Setia and Laurent Fransolet in a research note. European Central Bank data showed that some customers began to take money out of their accounts in February on the possibility that depositors would take a haircut in a bailout deal. The relative calm as bank employees returned to work helped settle early market jitters. The euro, which has dropped around 2.0 percent over the last couple of weeks, rose above $1.28 on Thursday, up from a four-month low against the U.S. dollar and a one-month low against the yen TREASURIES PARADOX Uncertainty has been amplified by an unexpected rise in German unemployment in March and the lack of a government in Italy following inconclusive elections. Germany's unemployment rise was countered by stronger retail sales and a surprise rebound in Italian business confidence. European stock markets shrugged off early nerves though as the calm in Cyprus was reported. With benchmark stock indexes in London, Frankfurt and Paris all higher, the FTSEurofirst 300 rose 0.4 percent. Most U.S. Treasuries and German government bonds - assets that investors turn to for safety - slipped. Benchmark 10-year Treasury notes were steady in late trade, yielding 1.85 percent. The Treasury's $29 billion sale of seven-year Treasury notes got a fairly weak reception. "This is the end of the month," Krosby noted. "Although most of the window dressing has taken place, you probably had a bit of window dressing from portfolio managers and especially hedge funds today." Typically, however, when stocks rise, Treasuries might beat a more decided retreat. Instead, they were only narrowly lower. Some analysts are perplexed as to why the 10-year Treasury note price has fallen back in the face of the upward move in stocks, Krosby said. "People wonder what the Treasury market sees that the equity market doesn't," she said. "With the S&P 500 stock index hitting new highs, you'd think the 10-year would match that confidence in the equity market by selling off. But it hasn't." Treasuries stayed in negative territory after the U.S. government raised its reading on U.S. economic growth in the fourth quarter of 2012, while reporting a bigger-than-expected rise in weekly jobless claims in the latest week. Gold slipped below $1,600 an ounce on Thursday, as banks reopened in Cyprus without panic, sapping demand for low-risk assets. Gold hit a one-month high of $1,616.36 last week on concerns the $10 billion euro rescue deal for Cyprus, which will leave big depositors and private bondholders with huge losses, could become a template for future bank bailouts in the euro zone. Gold slipped below $1,600 as banks reopened in Cyprus, priced at $1,596.31 an ounce by 1945 GMT. Spot prices were still set for a one percent gain in March, their first monthly rise in six months. U.S. gold futures dropped 0.64 percent to $1,596.00 an ounce. U.S. crude futures hovered above $96 a barrel. NYMEX crude for May delivery was up 51 cents at $97.09 a barrel by 1950 GMT. London Brent crude for May delivery rose 28 cents to $109.97 a barrel, but posted a loss of $1.09, or 0.9 percent, for the quarter.