European shares log weekly gains, UK's blue-chip index hits record high

European shares log weekly gains, UK's blue-chip index hits record high
By Reuters
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By Ankika Biswas and Amruta Khandekar

– European shares rose on Friday, boosted by gains in healthcare and energy firms, as optimism over the outlook for the region’s economy overshadowed concerns about U.S. interest rates staying elevated for longer than expected.

The pan-European STOXX 600 reversed early losses and ended up 0.3% at its highest since April last year. The index notched gains for the second straight week.

London’s blue-chip FTSE 100 briefly hit a new record high on Friday, marking a potential turning point for UK assets. The index closed up 1%.

European equities rallied in the previous session on hopes that the global rate-hiking cycle was close to an end, even as the European Central Bank (ECB) stayed hawkish.

A report from the U.S. Labor Department on Friday showing solid job additions in January has weighed on such hopes, as a persistently tight labor market could allow the Federal Reserve to keep interest rates higher for longer.

However, analysts said the report also pointed to signs of resilience in the U.S. economy, which could alleviate some fears of a steep downturn.

In the euro zone, business activity bounced back to growth in January, suggesting the bloc’s economy might again escape a contraction this quarter and that the upturn might accelerate.

Another report showed euro zone producer prices decelerated year-on-year in December.

“You still have an economy holding up exceptionally well, particularly in the jobs market, and you have an earnings season that has not been so bad in Europe so far,” said Giorgio Broggi, Quantitative Analyst at Moneyfarm.

“If inflation continues to stay under control in Europe and the U.S., then you expect a world where good news is good news, which means if the economy holds up, markets will do well.”

Healthcare stocks led gains on the STOXX 600 on Friday, rising 1.5% on a boost from shares of large drugmakers such as Novo Nordisk and Roche Holding.

However, French drugmaker Sanofi fell 1.9% after forecasting moderate 2023 earnings growth.

Energy stocks jumped 1.0%, tracking crude prices higher as investors weighed demand recovery in top consumer China while some consumer staple stocks also lent a boost to the STOXX 600.

Dutch navigation and digital mapping company TomTom jumped 4.6% after raising its 2023 guidance.

Spain’s Caixabank fell 2.7% as higher loan loss provisions overshadowed the Spanish bank’s full-year results.

Casino fell 3.6% after analysts flagged that talks with Teract to combine French retail activities would not address the supermarket group’s urgent need to slash debt.

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