Euro extends its rise; Italian banks shine
Germany led advances in European equity markets 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 opened the door to efforts aimed at breaking a political impasse.
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German stocks managed to push higher even as the euro advanced to a two-month high against the U.S. dollar.
Trading volumes will likely be thin on Friday as U.S. markets will be on a shortened schedule (http://www.marketwatch.com/story/when-do-markets-close-for-thanksgiving-2017-11-17) following Thursday's Thanksgiving Day holiday.
How key gauges moved: The export-heavy, and euro-sensitive, German DAX 30 benchmark picked up 0.6% to 13,086.59, on course to break a two-day run of losses and on track for a weekly rise of 0.7%.
In Paris, the CAC 40 claimed a 0.4% rise at 5,401.08 following Thursday's close at a near two-week high. In Madrid, the IBEX 35 picked up 0.4% to reach 10,072.30.
But the U.K.'s FTSE 100 index was down 0.1% at 7,412.76. That helped keep a lid on gains for the Stoxx Europe 600 , which rose less than 1 point to 387.28. Health care and oil and gas stocks led the declining sectors on the pan-European index. But basic material and financial shares were higher. On Thursday, the benchmark closed up less than 1 point (http://www.marketwatch.com/story/european-stocks-head-toward-2nd-straight-loss-as-euro-pushes-higher-2017-11-23) after a topsy-turvy session.
For the week, the Stoxx 600 was on course to rise 0.9%. That would be the first weekly rise in three.
The euro broke above $1.1900 for the first time since late September, rising to $1.1920 from $1.1850 late Thursday in New York. The shared currency has added roughly 1.2% this 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.
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) up 6%, Banco BPM SpA (BAMI.MI) higher by 4.2% and Unione di Banche Italiane SpA (UBI.MI) up 3%.
Paddy Power Betfair PLC tacked on 3.4% 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 were down 0.8%.
BT Group PLC (BT.A.LN) fell 1.2%, 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: 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.
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 11:22 ET (16:22 GMT)