EUROPE MARKETS: European Stocks Rise For 3rd Day As Global Rally Stays Strong

By Sara Sjolin, MarketWatch Features Dow Jones Newswires

Eurozone inflation falls in December

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European stock markets headed for a third straight day of gains on Friday, tracking the global equity rally that has sent U.S. stocks to fresh records and Japanese shares to a fresh 26-year high.

Car maker shares were again among the biggest advancers after a broker upgrade, setting the auto sector on track for its best week since July 2016.

What are markets doing: The Stoxx Europe 600 index rose 0.4% to 395.31, on track for its highest close since Nov. 6, when the pan-European benchmark ended at 396.59, according to FactSet data. For the week, the Stoxx 600 was set for a 1.6% gain, its biggest since mid-July last year.

Germany's DAX 30 index jumped 0.7% to 13,263.11 on Friday, while France's CAC 40 index (FR) put on 0.6% to 5,445.11.

The U.K.'s FTSE 100 index added 0.2% to reach 7,710.20, on track for a closing fresh record (http://www.marketwatch.com/story/ftse-100-powers-to-fresh-record-as-dow-25000-inspires-european-stock-rally-2018-01-05).

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The euro slipped to $1.2055, down from $1.2068 late Thursday in New York.

What is driving the market: The global rally that pushed stock prices significantly higher in 2017 and into the beginning of 2018 was showing no signs of abating on Friday. Traders in Europe took a cue from the U.S., where the Dow Jones Industrial Average on Thursday broke above the 25,000 to end at an all-time high (http://www.marketwatch.com/story/dow-on-track-for-25000-milestone-as-global-stock-rally-stays-strong-2018-01-04). The S&P 500 and Nasdaq Composite Index also scored record closes.

Continuing the upbeat action, Asian markets logged solid gains on Friday (http://www.marketwatch.com/story/asian-markets-continue-soaring-to-new-highs-but-show-signs-of-cooling-2018-01-04), with Japan's Nikkei 225 index ending at its highest level since January 1992.

Analysts said the closely watched U.S. nonfarm payrolls report due later could steer stocks on Friday. A strong reading on jobs and wages could further bolster the case for the Federal Reserve to raise interest rates in coming months, which is expected to impact financial markets globally. Many European companies do business with the U.S., so higher interest rates and possibly a stronger dollar could impact their earnings.

Read: Lack of wage growth will likely dampen celebration of December jobs report (http://www.marketwatch.com/story/lack-of-wage-growth-will-likely-dampen-celebration-of-strong-december-jobs-report-2018-01-04)

What are strategists saying: "European markets continue to make further gains, with the sheer scale of the global rally demonstrating how investors are embracing all things equity and risk related, basking in the euphoria of synchronous global growth," said Rebecca O'Keeffe, head of investment at Interactive Investor, in a note.

"With the party in full swing and implied volatility at such low levels, markets are seemingly immune to any possible downside, but the key risk that might ultimately bring markets down is inflation," she added.

That's why the U.S. jobs report on Friday takes on such significance, O'Keeffe explained, because it'll show if the stronger American economy has started to filter through to higher wages and is boosting inflation.

Stock movers: Shares of Volkswagen AG (VOW.XE) (VOW.XE) added 2.4% after Deutsche Bank lifted the company to buy from hold. Other car manufacturers were also rising, with shares of Fiat Chrysler Automobiles NV (FCA.MI) (FCA.MI) up 3.5%, Renault (RNO.FR) 1.2% higher and Peugeot SA (UG.FR) up 2.9%.

Car makers have been among biggest advancers this week, getting a boost from better-than-expected auto sales in the U.S. The Stoxx Europe 600 automobiles and parts index was up 1.2% on Friday, on track for a 4.4% weekly gain, which would be its since July 2016.

Shares of Henkel AG & Co. (HEN.XE) put on 1% after Bryan Garnier added the German chemical and consumer goods company to its top pick list.

EasyJet PLC (EZJ.LN) added 0.4% after the discount airline said passenger traffic rose 5.5% in December.

Economic news: Eurozone inflation fell to 1.4% in December from 1.5% in November, according to a flash estimate from Eurostat. The reading was in line with expectations.

Inflation in France (http://www.marketwatch.com/story/french-inflation-rises-but-less-than-expected-2018-01-05) rose for a fifth month in a row in December, with the EU harmonized reading coming in at 0.4%.

French consumer confidence rose to 105 in December (http://www.marketwatch.com/story/french-consumer-confidence-grows-in-december-2018-01-05) from 103 in November, beating analyst forecasts.

In the U.K., a report from the British Retail Consortium (https://brc.org.uk/news/2017/december-discounts-spur-shop-price-slide) out Friday showed U.K. store prices fell 0.6% in December year-on-year, as retailers offered discounts at the beginning of the Christmas month.

(END) Dow Jones Newswires

January 05, 2018 05:20 ET (10:20 GMT)