Euro strength set to spoil new year rally for European shares
Reuters
Published Jan 26, 2018 09:39
Euro strength set to spoil new year rally for European shares
MILAN (Reuters) - European shares edged up on Friday, helped by a solid update from luxury group LVMH, but they were set for a small weekly drop as a rising euro weighed after a strong start of the year.
The euro (EUR=) was up on Friday, though below the December 2014 high it hit on Thursday, after U.S. President Donald Trump said he wanted a "strong dollar", contradicting earlier comments made by Treasury Secretary Steven Mnuchin which sent the dollar plunging.
"The traffic light for dollar sellers is a bit less green," said Anthilia Capital fund manager Giuseppe Sersale.
The pan-European STOXX 600 (STOXX) index was up 0.4 percent by 0925 GMT, recovering from a one-week low hit in the previous session, while the export-oriented German DAX (GDAXI) index added 0.1 percent and the UK's FTSE (FTSE) rose 0.4 percent.
The STOXX 600 is down 0.1 percent so far this week, having gained around 3 percent in the previous three weeks, buoyed by optimism over Europe's economic and corporate earnings recovery.
A strong euro typically hurts European exporters whose products become less competitive against rivals producing in a weaker currency
LVMH (PA:LVMH) rose 4.7 percent after the world's biggest luxury goods maker reported higher sales and profits and said it had made a favourable start to 2018.
"The outlook for 2018 remains constructive, reflected in what was.. a confident conference call, and on account of a good entry speed into the year," Deutsche Bank (DE:DBKGn) said in a note.
It buoyed shares of other luxury goods companies. Christian Dior (PA:DIOR) and Kering (PA:PRTP) were both among the top five gainers on the STOXX, up 4.2 and 3 percent respectively.
According to Thomson Reuters data 80 percent of the MSCI Europe companies that have reported so fat have beaten fourth-quarter earning expectations and 12 percent have missed them.
Temenos (S:TEMN) was the biggest gainer in Europe, up 6 percent. The Swiss software firm, which is subject to regular takeover speculation, jumped as much as 18 percent on Thursday.
Kepler Cheuvreux raised its price target on Temenos on Friday, pointing to positive comments by Nordic bank Nordea regarding the integration of a Temenos banking platform. Kepler said takeover speculation had also pushed up Temenos shares. A Temenos spokesman could not be reached for comment on Thursday.
Among other gainers were Telia (ST:TELIA), up 2.2 percent, after the telecom operator lifted its dividend, while shares in Michelin (PA:MICP) and Thales (PA:TCFP) were buoyed by upbeat broker comments.
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A disappointing update however sent Norwegian insurer Gjensidige (OL:GJFS) down 5.8 percent. The company posted below-forecast profits for the fourth quarter and proposed a lower-than-expected full-year dividend.
Speciality baker Aryzta (S:ARYN) fell 7.1 percent as some brokers downgraded the stock following a profit warning that wiped out one fifth of its market value on Thursday.
Written By: Reuters
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