UKX FTSE 100 Index

By Sara Sjolin, MarketWatch

But Stoxx 600 rises 5% in December

European stock markets dropped on Friday, deepening their losses for the year and signaling investors are careful to take on more risk before 2017 kicks off.

The Stoxx Europe 600 index fell 0.3% to 359.30, setting it on track for a 1.8% loss for 2016. That would be the first time since 2011 that the pan-European benchmark ends a year with losses.

Mike van Dulken, head of research at Accendo Markets, said there was "some reticence to take on additional risk on this final session of the year given the strong run that equity markets have had and the myriad political hurdles we face in 2017."

Among major political events next year, the French and German elections are the highlights.

Stock markets globally, including European indexes, have rallied in November and December on the view that President-elect Donald Trump's administration will spur economic growth via spending and tax cuts. As the world's largest economy, accelerating growth in the U.S. is usually seen as a positive for stocks in other countries as many companies do business in the U.S.

Read:European breakdown? Why the continent's stocks are actually set for a solid 2017 (http://www.marketwatch.com/story/why-european-stocks-are-set-for-a-solid-2017-2016-12-28)

However, recently there have been concerns that the moves have come too far and too fast. U.S. stocks have fallen for the last two days, but futures were pointing to a positive trading day on Friday.

Germany's DAX 30 index fell 0.2% to 11,433.60 on Friday, trimming its yearly gain to 6.4%.

France's CAC 40 index lost 0.2% to 4,826.67. For the year, it was set for a 4.1% advance.

The U.K.'s FTSE 100 index gave up 0.3% to 7,098.32 on Friday, paring its 2016 gain to 13.7%. That yearly climb is still enough to make it the index's strongest since 2013 and the biggest of all major European benchmarks.

Read:Impressed by the Dow? This stock market has performed just as well in 2016 (http://www.marketwatch.com/story/impressed-by-the-dow-this-stock-market-has-performed-just-as-well-in-2016-2016-12-29)

Movers and shakers: Shares of Elekta AB (EKTA-B.SK) rose 1.2% after the Swedish health care company said it has signed a 13-year agreement with Stockholms County Council and New Karolinska Solna to advance cancer treatment.

For the full-year, shares of Anglo American PLC (AAL.LN) posted the biggest gain, soaring 287%. Overall, it's been a stellar year for miners, as they have risen alongside a recovery in commodity prices. Some analysts believe the mining sector will continue to outperform on 2017 as there are signs we are in the early days of a commodity cycle.

Read:5 overlooked stock picks for 2017 from top fund managers (http://www.marketwatch.com/story/5-overlooked-stock-picks-for-2017-by-top-fund-managers-2016-12-12)

More broadly for European stocks in 2017, analysts are optimistic that a rally for banks on the back of stronger economic growth and rising yields will help boost the region's markets.

Read: European breakdown? Why the continent's stocks are actually set for a solid 2017 (http://www.marketwatch.com/story/why-european-stocks-are-set-for-a-solid-2017-2016-12-28)

Euro spike: The shared currency jumped from $1.0490 to briefly trade above $1.0700 in a matter of seconds in thin Asian trade.

"Surpassing the $1.0500 level triggered substantial algo orders," said Ipek Ozkardeskaya, senior market analyst at London Capital, in a note. "Thin holiday volumes aggravated the quake."

"Given the nature of the price action, a further downside correction toward 1.0500/1.0475 could be expected," she added.

The euro pulled back to $1.0572 (http://www.marketwatch.com/story/euro-pulls-back-after-spike-but-dollar-weak-as-investors-warily-await-2017-2016-12-30) during European trading hours.

(END) Dow Jones Newswires

December 30, 2016 05:46 ET (10:46 GMT)

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