EUROPE MARKETS: European Stocks Extend Gains As Euro Remains Lower After Dovish ECB Move

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Clariant and Huntsman end merger talks

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A continued pullback in the euro and some well-received corporate earnings reports helped European stocks bounce higher Friday. German shares were on course to finish the week with a fresh record.

What stock indexes are doing

The Stoxx Europe 600 index rose 0.4% to 392.80, as just the basic materials sector lost ground. On Thursday, the benchmark jumped 1.1%, (http://www.marketwatch.com/story/european-stocks-cling-to-small-gains-as-investors-brace-for-ecb-move-2017-10-26)a move that could help leave it higher by 0.7% this week. That would be the index's sixth weekly advance in seven weeks, according to FactSet data.

On Friday, Germany's DAX 30 index rose 0.7% to 13,221.54, after finishing Thursday's session at a record close of 13,133.28.

In Paris, the CAC 40 moved up 0.6% to 5,489.32 and in London, the FTSE 100 rose 0.4% to 7,517.21 (http://www.marketwatch.com/story/ftse-100-steps-higher-as-pound-slips-again-2017-10-27), helped in part by a drop in the pound below $1.3100.

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But Italy's FTSE MIB slipped 0.2% to 22,772.11.

Spain's IBEX 35 fell 0.4% to 10,305.90,

What driving markets

The euro extended its loss against the dollar and other rival currencies in the wake of Thursday's decision by the European Central Bank to reduce its monthly bond purchases by half, to EUR30 billion starting in January, and extend the duration of the quantitative-easing program to at least September 2018.

Read:Draghi averts 'taper tantrum'--for now--as ECB takes baby step toward end of QE (http://www.marketwatch.com/story/draghi-averts-taper-tantrumfor-nowas-ecb-begins-slow-walk-to-normalization-2017-10-26)

Also read:Is the euro rally toast after ECB unveils dovish bond-buying cutback? (http://www.marketwatch.com/story/is-the-euro-rally-toast-after-ecb-unveils-dovish-bond-buying-reduction-2017-10-26)

Euro weakness can lead to gains in shares of European exporters, in part on the prospect that their products will become less expensive for overseas clients to purchase.

The euro on Friday fell to $1.1639 from $1.653 late Thursday in New York. The euro dropped below $1.18 on Thursday as the ECB issued its policy decision.

The reduced amount in monthly bond purchases was widely anticipated as the eurozone economy continues to recover, but the bank is still dealing with stubbornly low inflation. ECB President Mario Draghi said during his news conference the decision reflects an "open-ended" program that won't stop suddenly.

Read:Draghi averts 'taper tantrum'--for now--as ECB begins slow walk to normalization (http://www.marketwatch.com/story/draghi-averts-taper-tantrumfor-nowas-ecb-begins-slow-walk-to-normalization-2017-10-26)

Read MarketWatch's recap of Draghi's news conference (http://blogs.marketwatch.com/thetell/2017/10/26/live-blog-ecb-to-begin-tapering-its-massive-bond-buying-program-in-january/)

What strategists are saying

"While [the ECB decision] was exactly what most economists anticipated, it was slightly less than what some euro bulls may have hoped for," said Kathy Lien, managing director of FX strategy at BK Asset Management in a late Thursday note.

"More importantly, the ECB said they would keep rates at current levels well past the end of QE. That means the first rate hike would not be until October 2018. Nothing else mattered after Draghi made it clear that rates won't be increased anytime soon," and the euro appears set to test $1.1600, she added.

"The IBEX 35 is the notable exception to Europe's positive move this morning, as the market is in the red. The Spanish Senate is expected to vote in favor of stripping Catalonia of its autonomous powers and impose direct rule from Madrid. Such a move is likely to stir up tensions in the region, and investors are staying clear of Spanish stocks," said David Madden, market analyst at CMC Markets.

Read: Why Italy faces worst shock in Europe as ECB prepares to taper bond buys (http://www.marketwatch.com/story/why-italy-faces-worst-shock-in-europe-as-ecb-prepares-to-taper-bond-buys-2017-10-24)

Stock movers

Gemalto NV (GTO.AE) rallied 10% as the digital-security company backed its profit forecast for the year (http://www.marketwatch.com/story/gemalto-sales-flatten-backs-2017-profit-outlook-2017-10-27). Sales during the third-quarter were virtually flat.

Volkswagen AG shares (VOW.XE) rose 1.5% as the German auto maker raised its operating margin guidance for the full year. But third-quarter net profit slid to EUR1.06 billion (http://www.marketwatch.com/story/vw-profit-slides-on-emissions-scandal-charges-2017-10-27) ($1.25 billion), hit by costs related to its diesel emissions scandal.

Clariant AG (CLN.EB) dropped 6% as the Swiss chemicals maker and U.S.-based Huntsman Corp. (HUN) said they've ended their proposed merger (http://www.marketwatch.com/story/clariant-huntsman-call-halt-to-planned-merger-2017-10-27) to create a $15 billion chemicals company after facing pressure from U.S. activist investors.

UBS Group AG (UBS) said third-quarter net profit rose 14% to 946 million Swiss francs ($952.7 million). Shares of the Swiss lender were up 0.6%.

(END) Dow Jones Newswires

October 27, 2017 05:22 ET (09:22 GMT)