EUROPE MARKETS: DAX Breaks 2-day Losing Run As German Business, Political Prospects Brighten

By Carla Mozee, MarketWatch Features Dow Jones Newswires

Euro extends its rise; Italian banks shine

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German stocks snapped a two-session skid Friday, getting a lift as business optimism in the region's largest economy climbed to a record and as one of Germany's major political parties cracked the door to possibly breaking a political impasse.

How key equity gauges traded: The export-heavy -- and euro-sensitive -- German DAX 30 benchmark picked up 0.4% to end at 13,059.84, breaking a two-day run of losses. It closed the week up by 0.5%, snapping two weeks of declines. On the index, chemicals maker BASF (BAS.XE) topped gainers with a 2.9% rise and car maker Volkswagen AG (VOW.XE) moved up 1%.

In Paris, the CAC 40 claimed a 0.2% rise at 5,390.46. In Madrid, the IBEX 35 picked up 0.2% to end at 10,053.50. Those indexes on a weekly basis rose 1.3% and 0.4%, respectively.

But the U.K.'s FTSE 100 index slipped 0.1% to end at 7,409.64. That helped keep some pressure on the Stoxx Europe 600 , which ended down less than 1 point at 386.63.

Health-care and oil-and-gas stocks led the declining sectors on the pan-European index. But tech, financial and basic-material shares closed up.

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For the week, the Stoxx 600 rose 0.7% and that's the first weekly rise in three.

The euro broke above $1.1900 for the first time since late September, rising to $1.1945 from $1.1850 late Thursday in New York. The shared currency added roughly 1.2% this week as European markets wound down for the week.

A stronger euro can be a headwind to shares of European exporters, as holders of other currencies may find it more expensive to buy goods from European companies.

What's driving markets: Businesses in Germany have been upbeat about their prospects this month and for the months ahead. German think tank Ifo said Friday its business-climate index rose to a record high (http://www.marketwatch.com/story/german-business-sentiment-pushes-to-record-high-2017-11-24) of 117.5 points, surpassing expectations.

"Germany is on track for an economic boom," said Ifo president Clemens Fuest in the report.

The euro extended gains following the Ifo report. That added to its rise on Thursday after an upbeat reading on eurozone services and manufacturing activity (http://www.marketwatch.com/story/eurozone-business-booming-as-pmis-jump-2017-11-23) and a finding of higher growth in German gross domestic product (http://www.marketwatch.com/story/german-economy-picked-up-speed-in-3q-2017-11-23).

The bulk of responses to Ifo survey came before the collapse of talks to create a coalition to form a German government on Sunday. But on Friday, Germany's Social Democrats reportedly dropped their hard refusal (https://www.politico.eu/article/martin-schulz-social-democrats-mulling-renewed-grand-coalition-with-angela-merkel/) to set up another Grand Coalition to govern alongside Chancellor Angela Merkel's Christian Democrats, raising anticipation that the country's political crisis may be resolved.

Meanwhile, Italian banks charged higher following reports that new rules proposed in the European parliament could help lenders more easily dump their portfolio of bad loans.

Trading volumes were likely thin on Friday as U.S. markets were on a shortened schedule (http://www.marketwatch.com/story/when-do-markets-close-for-thanksgiving-2017-11-17) following Thursday's Thanksgiving Day holiday.

What strategists are saying: "The news that Angela Merkel and her CDU-CSU party are set to meet with their former Social Democrat coalition partners acted as a pick-me-up for the euro," said Connor Campbell, financial analyst at Spreadex, in a note.

"These gains took the edge off the DAX's own growth, with a 1% lunchtime surge halving to 0.5%; still, this keeps the German index above 13,000, a level it's struggled with for the past few sessions," he said.

Stock movers: Italian banks were among the best performers on the Stoxx 600, with BPER Banca SpA (BPE.MI) at the top as it climbed 5.9%. Banco BPM SpA (BAMI.MI) bulked up by 4.8% and Unione di Banche Italiane SpA (UBI.MI) shares added 2.5%.

They outperformed Italy's broader market, with the FTSE MIB closing up 0.1% at 22,416.31.

Paddy Power Betfair PLC tacked on 3.2% following a Reuters report (https://uk.reuters.com/article/us-crown-resorts-m-a/exclusive-paddy-power-betfair-and-william-hill-hold-deal-talks-with-crownbet-idUKKBN1DO05E) the Irish bookmaker has held talks about a deal with Australian online gambling company CrownBet. Paddy Power's rival William Hill PLC (WMH.LN) on Friday said it's in preliminary talks about a possible merger between its William Hill Australia (http://www.marketwatch.com/story/william-hill-in-talks-with-crownbet-over-tie-up-2017-11-24) subsidiary and CrownBet.

William Hill shares fell 1.3%.

BT Group PLC (BT.A.LN) fell 1% to GBP2.76, with Deutsche Bank cutting its price target on the British telecoms group to GBP2.38 from GBP2.68, according to Dow Jones Newswires.

Brexit watch and Ireland: U.K. Prime Minister Theresa May was in Brussels on Friday, discussing Brexit matters with the European Council President, Donald Tusk. May is reportedly aiming to extend an offer of GBP40 billion for a so-called divorce bill as Britain prepares to leave the European Union. EU officials have said that issue needs to be settled before they can start talks on trade of goods and services.

On Friday, U.K. government officials reportedly clawed back on a Downing Street spokesman's statement (http://www.huffingtonpost.co.uk/entry/brexit-northern-ireland-customs-union_uk_5a180588e4b064948073cf70) that suggested the possibility of Northern Ireland staying in the EU's customs union after the U.K. breaks from the bloc.

There are concerns among businesses that Brexit will result in the re-emergence of a hard border between Northern Ireland, which is part of the U.K., and the Republic of Ireland, which is an EU member.

Check out:Irish border proves a roadblock in U.K.'s Brexit talks (https://www.wsj.com/articles/irish-border-emerges-as-roadblock-in-u-k-s-brexit-talks-1511386336)

Separately on Friday, the Irish government appeared headed toward a snap election next month. The country's second-largest political party, Fianna Fáil, lodged a no-confidence motion against Deputy Prime Minister Frances Fitzgerald, with the move stemming from controversy over her handling of a police whistleblower while she served as justice minister.

Fianna Fáil is in a support deal with the minority government led by the Fine Gael party.

(END) Dow Jones Newswires

November 24, 2017 12:29 ET (17:29 GMT)