EUROPE MARKETS: European Banks Rally, Leading Stocks To 1-month High

By Carla Mozee, MarketWatchFeaturesDow Jones Newswires

U.K. and EU make breakthrough on Brexit divorce terms, clearing way to next stage of negotiations

European stocks rose Friday, headed for their highest close in a month, after the U.K. and the European Union came to terms on a Brexit divorce deal, opening the way to a key phase of talks.

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Bank stocks were in rally mode after news of the Brexit breakthrough and after global financial officials finally signed a deal Thursday to harmonize banking rules.

How markets are moving: The Stoxx Europe 600 popped up 0.8% to 389.67, on course for its highest close since Nov. 11, according to FactSet data. Financial and technology stocks were the biggest gainers on a sector basis, while the oil and gas, and consumer goods groups were lower. On Thursday, the index finished fractionally higher (http://www.marketwatch.com/story/european-stocks-on-course-to-break-losing-streak-as-betting-shares-catch-a-bid-2017-12-07).

For the week, the Stoxx 600 was looking at a 1.4% rise, following last week's fall of 0.7%.

(http://www.marketwatch.com/story/european-stocks-on-course-for-2nd-losing-session-with-tech-knocked-down-2017-12-06)In Frankfurt on Friday, the DAX 30 index jumped 1.1% to 13,184.60, and in Paris, the CAC 40 gained 0.5% to 5,415.49. Spain's IBEX 35 leapt 0.9% to 10,357.20.

The U.K.'s FTSE 100 was up 0.2% to 7,332.77.

The euro traded at $1.1744, on par with its level late Friday. Against the pound, the shared currency 0.8712 pence, down from 0.8737 pence late Thursday.

The yield on 10-year German government bonds rose 2 basis points to 0.312%, according to Tradeweb. Yields rise when prices fall.

What's moving markets: The president of the European Commission, Jean-Claude Juncker, said early Friday that "sufficient progress" has been made (http://www.marketwatch.com/story/breakthrough-on-brexit-terms-opens-way-to-next-phase-of-talks-2017-12-08) on three key issues in Brexit negotiations to allow the talks to advance to the next phase.

"I believe we have now made the breakthrough we needed," Juncker said at a press conference in Brussels.

After a night of intense negotiating, British Prime Minister Theresa May managed to resolve the final issue -- the Irish border -- needed to satisfy the EU side.

The Brussels negotiating team is now recommending that EU leaders give the go-ahead for Brexit talks to move to the second stage, which will cover trade agreements and a potential transition period. The European Council meeting of EU leaders is scheduled for Dec. 14-15.

The pound hit an intraday high of $1.3521 following news of the deal, but it has since moved back to $1.3481. That compares with $1.3475 late Thursday in New York

Stock movers: The Stoxx Europe 600 Bank Index surged 2.7%, on course for its biggest leap since April.

On Thursday, international banking regulators agreed on the final Basel III standards for banks. The harmonized rules, conceived after the financial crisis, aim to shield taxpayers from bank bailouts by making sure lenders have adequate cushion against shocks. The standards must now be passed into national laws.

Friday's Brexit breakthrough also helps the financial industry, as it brightens the prospects for a smooth transition when the U.K. withdraws from the EU in 2019.

In the bank group, Germany's Deutsche Bank AG (DBK.XE) jumped 2.9%, as did shares of London-based Barclays PLC (BCS) . France's Societe Generale SA (GLE.FR) surged 4%, Spain's Banco Santander SA (SAN) picked up 2.5%, and Italy's Unione di Banche Italiane SpA (UBI.MI) moved up 2.8%.

What strategists are saying: "The political mood has been lifted, but the FTSE 100 is underperforming its continental counterparts due to a firmer pound," said David Madden, market analyst at CMC Markets UK, in a note.

"The DAX has been given a boost after Martin Schulz of the Social Democrats suggested his party is warming up to the idea of entering into coalition talks with Angela Merkel's Christian Democratic Union. The German economy has been performing well without a functioning government, and [the] news has added to the positive sentiment," said Madden.

(END) Dow Jones Newswires

December 08, 2017 05:34 ET (10:34 GMT)