EUROPE MARKETS: European Stocks Edge Up With Fiat Gaining, But Euro Jumps On German Progress

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01/12/2018 | 11:58 am

By Carla Mozee, MarketWatch

Vivendi trims outlook

European stocks edged higher Friday, with Fiat Chrysler Automobiles NV and industrial names advancing, but gains were held in check by a surging euro on the back of a breakthrough in German government-coalition talks.

How markets are moving

The Stoxx Europe 600 index rose 0.1% to 397.64. On Thursday, the benchmark fell 0.3% , a second straight loss.

The index is poised for just a fractional gain for the week, following last week's rise of 2.1%.

Germany's DAX 30 index was up 0.1% at 13,215.12, and France's CAC 40 picked up 0.1% at 5,493.95.

The U.K.'s FTSE 100 index edged up 0.1% to 7,772.85, on track for another record closing high. Spain's IBEX 35 rose 0.3% to 10,467.70.

The euro charged up to $1.2123 from $1.2034 late Thursday in New York.

The yield for the 10-year German government bund fell 2 basis points to 0.51%, according to Tradeweb. Yields fall when prices rise.

What's driving markets

Trading got under way with news that German Chancellor Angela Merkel's conservative CDU party has reached an initial deal with Martin Schulz's center-left SPD for formal coalition negotiations. Germany in September held elections in which incumbent Merkel won, but she had since been unable to secure a coalition to rule.

The coalition news sent the euro surging above $1.21 against the dollar for the first time since January 2015. But a stronger euro can weigh on shares of European exporters as it can make their products more expensive for holders of other currencies to purchase.

The shared currency has risen roughly 0.8% against the greenback this week. It leapt through $1.20 on Thursday after minutes from the ECB's December meeting suggested it may take on a hawkish tone on its stimulus efforts as the eurozone economy has continued to expand.

Investors this week have been starting to see more trading updates as the earnings season begins to pick up pace. Also on deck Friday will be U.S. inflation data, which would drive the euro-dollar pair further.

What strategists are saying

"Merkel is one of the biggest proponents of the eurozone project, and her ability to remain in power will be key to ensuring stability as we go forward. While a deal is not across the line, the sands seem to be shifting in favor of a positive, stable resolution which is expected to remove a significant degree of uncertainty for euro traders," said IG Market Analyst Joshua Mahony in a note.

Stock movers:

GKN (>> GKN) shares rallied 26% as the engineering group said it's rejected an offer approach from Melrose Industries PLC (>> Melrose Industries). GKN also said it plans to separate its aerospace and automotive businesses, as it named Anne Stevens as chief executive officer.

Fiat Chrysler shares (>> Fiat Chrysler Automobiles) in Milan rose 2.8% after the company said late Thursday it plans to invest $1 billion to shift production of its profitable Ram Heavy Duty trucks to Michigan from Mexico. The move could help the Italian-U.S. auto maker lower risks related to potential changes to the North American Free Trade Agreement.

Vivendi SA shares (>> Vivendi) fell 1.1%, with the French media group saying it foresees 2017 growth of 20% to 25% in earnings before interest, taxes and amortization. It also said revenues should increase by close to 5%. Vivendi had previously projected revenues to increase by more than 5% and core earnings to rise by around 25%.

German auto maker Volkswagen AG (>> Volkswagen AG) (>> Volkswagen AG) picked up 0.7%. The company's rating at Macquarie was raised to outperform from neutral, according to Dow Jones Newswires.

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