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EUROPE MARKETS: Luxury-goods Shares Lead Europe Higher As Traders Shake Off Rising Euro

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01/26/2018 | 06:04 pm

By Sara Sjolin, MarketWatch

Euro logs biggest weekly gain since July

European stocks rebounded Friday, almost erasing a weekly loss as traders ignored the continued rally in the euro and instead focused on upbeat updates from heavyweights AstraZeneca and LVMH.

What are markets doing?

The Stoxx Europe 600 index gained 0.5% to close at 400.57, trimming its weekly loss to 0.1%.

Germany's DAX 30 index rose 0.3% to 13,340.17, while France's CAC 40 gained 0.9% to 5,529.15.

The U.K.'s FTSE 100 index put on 0.7% to 7,665.54 .

The euro rose to $1.2425 from $1.2397 late Thursday in New York, while the pound climbed to $1.4173 from $1.4139 on Thursday.

What's driving the markets?

The trading action this week has largely been driven by moves in the currency markets, as the dollar suffered a sharp selloff and boosted the euro. A strong euro often weighs on European stock markets because it can hit trade and make products more expensive for other trading partners.

The greenback momentarily got a break from its downturn when U.S. President Donald Trump in an interview with CNBC on Thursday spoke out in favor of a stronger dollar and said the currency is "going to get stronger and stronger."

The dollar was again moving lower on Friday , however, with the euro climbing. The shared currency has risen 1.7% against the dollar this week, its biggest weekly advance since July last year, according to FactSet data.

But traders appeared to be ignoring the currency moves for a bit, pushing European markets higher on company news. The gain was driven by the pharmaceutical and luxury-goods sectors after well-received corporate updates from key industry players.

In the U.K., investors were also encouraged by gross domestic product data that showed Britain's economy expanded 0.5% quarter-on-quarter in the last three months of 2017, beating forecasts of a 0.4% reading. For the full year, GDP grew 1.8%, down from 1.9% in 2016.

What are strategists saying?

"It had been our view that the pace of gains in EUR/USD would slow this year on the assumption that many investors must already be long EURs. However, on the back of recent price action, strong eurozone data and comments from the U.S. Treasury Secretary we are revising up our 12 month EUR/USD forecasts to 1.28 from a previous forecast of 1.24. The conservative nature of this revision reflects our expectation that EUR/USD is vulnerable to a period of consolidation or a pullback in the coming weeks," said Jane Foley, senior FX strategist at Rabobank, in a note.

Which stocks are in focus?

Shares of AstraZeneca PLC (>> AstraZeneca) (>> AstraZeneca) rose 1.9% after the drugmaker released positive results for its PT010 therapy for chronic obstructive pulmonary disease.

Other drugmakers also rose, with Vifor Pharma AG (>> Vifor Pharma) up 2.9% and GlaxoSmithKline PLC (>> GlaxoSmithKline) (>> GlaxoSmithKline) rising 1.5%.

In the luxury-goods arena, shares of LVMH Moët Hennessy Louis Vuitton SE (LVMUY) gained 5.9% after the French conglomerate late Thursday said profit for 2017 jumped 29% , beating analyst forecasts.

Tracking LVMH higher, shares of Christian Dior SE (>> Christian Dior SE) gained 4.7%, Gucci-parent Kering SA (>> Kering) rose 2.6% and Hermes International SCA (>> Hermès International) put on 1.9%.

Shares of Telia Co. AB (>> TeliaSonera) climbed 3.8% after the Nordic telecom operator raised its dividend and said it's selling Georgian business .

On a downbeat note, Aryzta AG (>> Aryzta) slumped 8.9%, adding to a 21% plunge from Thursday when the Swiss bakery company issued a profit warning.

Gjensidige Forsikring ASA (>> Gjensidige Forsikring) slid 6.6% after the Norwegian insurer posted fourth-quarter earnings below forecasts.

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