By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) -- European investors returned from a
two-day Christmas break to push stocks higher on Friday, playing
catch-up with U.S. markets as the euro soared to a two-year high
versus the dollar.
The Stoxx Europe 600 index gained 1.1% to end at 327.68, leaving
it with a 2% gain in a holiday-shortened week and a rise of more
than 17% since the beginning of the year.
A positive early tone on Wall Street helped add to gains. U.S.
stocks later turned mixed but were on track for a solid weekly gain
after hitting record levels earlier this week.
Germany's DAX 30 index rose 1.1% to close at a record high
9,589.39.
Some big moves among the major indexes were seen in London,
where the FTSE 100 gained 0.8% to close at 6,750.87, reaching
levels not seen since mid-November. In Paris, the CAC 40 index
jumped 1.4% to 4,277.65.
But the rally, with many traders set to remain away for the rest
of the year, sparked words of caution from analysts. "This is all
about the free market and the cheap money which is available, and
this is still pushing the markets higher," said Naeem Aslam, chief
market analyst at Ava Trade, in emailed comments. "We think
investors should be very careful in taking their profits."
Gains across Europe were also inspired by a sharp move higher
for the euro(EURUSD), which surged to a high of $1.3893, according
to FactSet, a level not seen in more than two years. The euro
subsequently gave back some of the rally, but remains up around
0.5% at $1.3767. The jump came after German Bundesbank President
Jens Weidmann, who is a member of the European Central Bank's
Governing Council, reportedly warned that low inflation in the
region should not be used as a reason to keep interest rates low.
The ECB's main refinancing rate was cut to 0.25% in November.
Other reports said euro demand rose as banks adjusted positions
for the end of the year.
The Stoxx 600 got a boost from several heavyweight players, such
as Novo Nordisk AS (NVO), which rose 1.1% and was also part of the
best-performing sector, drug stocks. Earlier in the week, Novo
Nordisk said the Food and Drug Administration had approved its
Tretton drug, used to prevent bleeding in patients with a rare
clotting disorder.
Staying in the drug sector, Novartis AG gained 1.7%. The food
and oil sectors were also among the day's best performers.
On the downside, shares of International Personal Finance PLC
plunged nearly 16% after the home credit business said its Polish
unit had been fined 2.4 million pounds by the Polish Office of
Consumer Protection and Competition.
Greece's Athex Composite Index jumped 4.8%. Greek stocks have
lost more than 2.5% this month.
On the downside, Turkish stocks and the lira were hit hard by
political uncertainty in the country. The Istanbul National 30
index sank 1.1%, and the lira fell to fresh lows on Friday.
Analysts said the government could call snap parliamentary
elections to curb the uncertainty that has roiled markets for two
weeks.
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