EUROPE MARKETS: European Stocks Weighed Down By Bank Shares, But Log Best Week In 2 Months
|07/14/2017 | 01:17pm|
By Carla Mozee, MarketWatch
Euro bulks up more than 1% against the greenback
European stock markets largely finished lower Friday, with bank shares taking a hit after their U.S. peers kicked off a new earnings season, but regional equities on the whole marked their best weekly performance in more than two months.
Benchmarks in Germany, France, Spain, Italy and the U.K. each closed in the red, but the Stoxx Europe 600 managed to finish higher by 0.2%, with commodity shares among its advancers.
The pan-European gauge was also aided by Greek stocks, whose rise left the Athex up 0.3% at 856.47. Investors will watch for any word on whether the Greek government will return to the bond market (https://www.wsj.com/articles/european-commission-urges-eu-to-end-disciplinary-measures-against-greece-1499866095) as early as next week.
For the week, Stoxx 600 finished up by 1.8%, the largest percentage gain since the week ended May 5, FactSet data show. Stocks during the week climbed after Federal Reserve Chairwoman Janet Yellen said U.S. interest rates don't have to rise all that much further.
Banks: But Friday's session ended with a drop in bank shares that pulled the Stoxx Europe 600 Banks Index down by 0.7%. European lenders followed U.S. bank stocks lower after the release of second-quarter figures from Citigroup Inc. (C) , J.P. Morgan Chase & Co. (>> JP Morgan Chase & Company) and Wells Fargo & Co. (>> Wells Fargo) .
Those big banks each posted higher-than-anticipated profit, but reported weaker trading revenue, falling short of what analysts had expected and raising questions about what European lenders will say about such revenue when they begin releasing financial results in the coming weeks.
Among major European banks, shares of Deutsche Bank AG (>> Deutsche Bank) (>> Deutsche Bank) and Banco Santander SA (>> Banco Santander, S.A.) (>> Banco Santander, S.A.) each fell 0.9%, as did shares of BNP Paribas SA (>> BNP Paribas).
Bank stocks will be back in focus next week when the European Central Bank releases its next policy decision on Thursday.
"At a time when more central banks are talking about retreating from QE, a more hawkish European Central Bank would also be positive for European banks, with a focus on how quickly and by how much rates could go up," said analysts at UBS in a research note published Friday.
Increases in short-term lending rates by central banks should lead to higher profit margins for banks.
Euro pops higher: Yellen did say that inflation would be a factor the Fed's plan to gradually raise rates. But U.S. consumer-price inflation and retail sales figures released Friday fell short of expectations. That send the dollar spiraling lower and the euro leaping by more than 1%. A stronger euro can reduce revenue for European companies that sell their goods and services overseas.
The euro climbed to $1.1459, up from $1.1399 late Thursday in New York.
Stock movers: Skanska AB (SKA-B.SK) fell 6.2% after the Swedish construction company said it's writing down roughly 780 million Swedish kronor ($934 million) in certain U.S. and U.K. operations in the second quarter. Operating income for the period is expected at 1.5 billion Swedish kronor, down from 1.7 billion Swedish kronor in the year-ago period.
National indexes: Germany's DAX 30 index closed 0.1% lower at 12,631.72, and France's CAC 40 index turned fractionally lower to end at 5,235.31. The U.K.'s FTSE 100 index fell 0.5% to 7,378.39 .
Spain's IBEX 35 shed 3.2 points at 10,655.10 and Italy's FTSE MIB closed Friday's session down 0.1% at 21,492.29.