EUROPE MARKETS: Bank Rally Helps Lift European Stocks To Highest Finish In 3 Weeks

U.K. stocks slide, pound rallies on signs of Brexit breakthrough

European stocks closed at a nearly three-week high on Wednesday, boosted by a rally in the region's bank shares a day after U.S. Federal Reserve Chairman-nominee Jerome Powell said he hopes to ease financial regulations.

The U.K. stock market, however, missed out on the European bounce as the pound rallied after signs of a breakthrough in Brexit negotiations between London and Brussels.

What are markets doing: The Stoxx Europe 600 index climbed 0.3% to end at 388.04, scoring its highest close since Nov. 10, according to FactSet data.

France's CAC 40 index added 0.1% to finish at 5,398.05, while Germany's DAX 30 index edged up less than 0.1% to 13,061.87.

The U.K.'s FTSE 100 index slid 0.9% to finish at 7,393.56 (http://www.marketwatch.com/story/ftse-100-slides-as-pound-rallies-to-2-month-high-on-brexit-breakthrough-reports-2017-11-29), as the pound touched a two-month high (http://www.marketwatch.com/story/pound-jumps-on-hopes-of-brexit-progress-dollar-falls-2017-11-29) and recently changed hands at $1.3434, up from $1.3339 late Tuesday in New York.

The euro rose to $1.1859 from $1.1842 on Tuesday.

What's driving the markets: European bank shares rallied 1.6%, tracking gains for their U.S. counterparts on Tuesday. The upbeat mood in the sector came after Powell said during a Senate confirmation hearing that he hopes to look for ways to ease what he views as excessive regulations (http://www.marketwatch.com/story/powell-says-the-us-no-longer-has-too-big-to-fail-banks-2017-11-28) for the financial industry.

Many European banks do business in the U.S., so looser regulations stateside could also be a boon for them.

Traders were also encouraged by progress on a Republican-backed tax overhaul (http://www.marketwatch.com/story/senate-budget-committee-advances-republican-tax-bill-on-party-lines-2017-11-28) in the U.S. after the Senate Budget Committee on Tuesday voted 12-11 to advance a bill. A full Senate vote could be possible as early as Thursday. U.S. stocks closed firmly higher on Tuesday (http://www.marketwatch.com/story/dow-gathers-strength-for-higher-open-as-traders-brace-for-powell-hearing-2017-11-28), but futures were struggling for direction early Wednesday.

"Market volatility has taken a turn for the better, with yesterday's news of a potential breakthroughs on both U.S. tax reforms and Brexit negotiations sparking global stocks into a renewed bullish phase," said Joshua Mahony, market analyst at IG, in a note.

"With bitcoin hitting $10,000 (http://www.marketwatch.com/story/bitcoin-just-broke-through-10000-milestone-in-fastest-1000-jump-ever-2017-11-28), and the Dow heading towards 24,000, there is a clear appetite for risk amongst the trading community of late, with December looking primed for another Santa rally," he added.

See: Bitcoin soars to $11,000 just one day after taking out $10,000 (http://www.marketwatch.com/story/bitcoin-within-touching-distance-of-11000-just-one-day-after-taking-out-10000-milestone-2017-11-29)

Brexit breakthrough: In the U.K., all eyes were on developments in the Brexit talks after local media reports that the U.K. government has offered Brussels (http://www.marketwatch.com/story/uk-closes-in-on-brexit-divorce-bill-deal-with-eu-ready-to-up-offer-2017-11-29) a larger potential exit payment of up to 50 billion euros ($59 billion).

Prime Minister Theresa May in September suggested Britain would pay only EUR20 billion, but the EU said the amount would have to be increased to be able to move the withdrawal talks on to deal with trade and a potential transition period.

The move from London is seen as potentially unlocking the negotiations deadlock ahead of an EU summit on Dec. 14-15.

"While this stage of the negotiations has little economic significance for sterling, the news of a breakthrough in talks has profound political significance for a currency that is pricing in a lot of bad news," said Viraj Patel, foreign-exchange strategist at ING, in a note.

"We do foresee a 'gentlemen's agreement' over a transition deal as being a bigger positive catalyst for GBP down the road, but for now we hold the view that small steps forward are helpful for U.K. asset prices," he added.

Stock movers: Among banks on the move, Barclays PLC (BCS) (BCS) rose 3.7%, Santander SA (SAN) (SAN) added 1.8% and Deutsche Bank (DBK.XE) (DBK.XE) put on 2.4%.

Daimler AG (DAI.XE) rose 0.3%. It declined an offer from China's Zhejiang Geely Holding Group to buy a stake of between 3% and 5% in the German car maker, according to Reuters (https://www.reuters.com/article/us-daimler-m-a-geelyautomobile-exclusive/exclusive-daimler-turns-down-geely-offer-to-take-up-to-5-percent-stake-via-new-share-issue-idUSKBN1DT0Q1).

Britvic PLC (BVIC.LN) rallied 6.9% after the soft drinks maker said revenue rose 8% in fiscal 2017 (http://www.marketwatch.com/story/britvic-full-year-profit-falls-9-on-planned-costs-2017-11-29).

London Stock Exchange Group PLC (LSE.LN) gained 0.1%, shaking off an earlier loss that came after news CEO Xavier Rolet is leaving earlier (http://www.marketwatch.com/story/lse-ceo-rolet-steps-down-chairman-to-go-in-2019-2017-11-29) than expected. The company's chairman is also stepping down in 2019.

Ocado Group PLC (OCDO.LN) soared 16%, adding to a 21% rally from Tuesday when Casino Guichard-Perrachon signed a deal with Ocado to develop an online shopping platform in France.

Outside the main European benchmark, shares of Cineworld Group PLC (CINE.LN) tanked 20% after news the movie theater operator has made a $3.1 billion offer (http://www.marketwatch.com/story/uk-theater-chain-cineworld-makes-36-billion-bid-for-regal-entertainment-2017-11-28) for American counterpart Regal Entertainment Group (RGC).

In other stock news, Delivery Hero AG (DHER.FF), Rémy Cointreau SA (RCO.FR) and Pirelli & C. SpA (PIRC.MI) are among companies that will be added to the Stoxx 600 on Dec. 18.

Economic news: Economic sentiment in the eurozone continued to rise in November, hitting the highest level since October 2000 (https://ec.europa.eu/info/business-economy-euro/indicators-statistics/economic-databases/business-and-consumer-surveys/latest-business-and-consumer-surveys_en), according to data from the European Commission.

(END) Dow Jones Newswires

November 29, 2017 12:37 ET (17:37 GMT)