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 0.7% to 396.27, 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 1.8% gain, its biggest since May last year.

Germany's DAX 30 index jumped 1% to 13,292.87 on Friday, while France's CAC 40 index (FR) put on 0.8% to 5,457.07.

The U.K.'s FTSE 100 index added 0.2% to reach 7,708.81, 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 $1.2036, 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 few 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). U.S. stocks also advanced on Friday (http://www.marketwatch.com/story/sp-eyes-another-historic-record-run-with-us-jobs-data-on-deck-2018-01-05), aiming for fresh records across the board.

Extending 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.

Stocks in the Europe maintained gains after the U.S. employment report showed fewer-than-expected jobs (http://www.marketwatch.com/story/us-adds-148000-jobs-in-december-2018-01-05) were added by the American economy in December, while wage growth remained disappointing. Analysts had said a strong reading on jobs and wage growth would bolster the case for the Federal Reserve to raise interest rates, which could influence financial markets globally.

As the dollar typically rises when rates go up, that has implications for the multinationals listed in Europe, as they do business in the U.S. and take payments in the U.S. currency

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.

Stock movers: Shares of Volkswagen AG (VOW.XE) (VOW.XE) added 2.5% after Deutsche Bank lifted the company to buy from hold. Fiat Chrysler Automobiles NV (FCA.MI) (FCA.MI) rose 5.1% after J.P. Morgan upgraded the car maker to overweight from neutral.

Other car manufacturers were also rising, with shares of Renault (RNO.FR) 1.9% higher and Peugeot SA (UG.FR) up 4.1%.

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 1.8% on Friday, on track for a 6% weekly gain, which would be its best since July 2016.

Shares of Henkel AG & Co. (HEN.XE) put on 1.4% after Bryan Garnier added the German chemical and consumer goods company to its top pick list.

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-over-year, as retailers offered discounts at the beginning of the Christmas month.

(END) Dow Jones Newswires

January 05, 2018 10:44 ET (15:44 GMT)