European stocks notched modest gains Friday, with an upbeat view on trade talks between the U.S. and China cooling concerns about tensions that recently have hurt markets worldwide.
Stocks across the region stayed in positive territory after U.S. labor market data showed the country’s unemployment rate dropped to a 17-year low.
But the European bank sector was faring the worst Friday as shares of French banks Société Générale SA GLE, -6.63% and BNP Paribas SA BNP, -2.37% dropped following their respective financial results.
How markets are moving
The Stoxx Europe 600 index SXXP, +0.36% picked up 0.3% to 385.59, setting it on track for a 0.3% gain on the week. That rise would be enough for a sixth straight weekly advance, which would be the longest run of weekly wins since March 2015, according to FactSet data.
On Thursday, the Stoxx 600 fell 0.7% and printed its lowest close since April 26.
France’s CAC 40 PX1, +0.04% lagged other major indexes as it lost 0.1% to 5,498.13. Germany’s DAX 30 DAX, +0.62% rose 0.4% to 12,739.57, and the U.K.’s FTSE 100 UKX, +0.64% was up 0.5% to 7,543.41.
The euro EURUSD, -0.3837% bought $1.1916, down from $1.1988 late Thursday in New York. The shared currency has fallen about 1.8% against the buck this week.
What’s driving the market
A choppy week for European blue-chips was coming to an end with a new rush of corporate financial results in focus. Meanwhile, the basic materials sector got a lift from a welcome sign coming out of China, a major buyer of industrial and precious metals. The Stoxx Europe 600 Basic Materials SXPP, +0.77% bulked up by 0.5%. China is also a major market for European exports, such as automobiles.
U.S. Treasury Secretary Steven Mnuchin said trade talks between U.S. and China, now in their second day in Beijing, are going well, according to media reports. But the U.S. delegation has presented Chinese officials with a lengthy list of demands aimed at reducing the trade imbalance between the world’s two biggest economies, The Wall Street Journal reported.
Worries about heightened trade tensions between the world’s two largest economies have rattled financial markets throughout this year.
European stocks were little changed after disappointing eurozone retail sales data for March, with growth of 0.8% falling short of a 1.9% consensus estimate from FactSet. Separately, the final print of the eurozone services PMI for April came in at 54.7, down from a flash estimate of 55.0 from IHS Markit.
Investors in Europe also largely ignored U.S. jobs data, showing the unemployment rate in April dropped below 4% for the first time since 2000. The dollar shot higher after the news, with the ICE U.S. Dollar Index DXY, +0.32% rising 0.5% to 92.870.
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What are strategists saying?
“With U.S.-Chinese talks likely entering their final day, there is a great degree of market sensitivity around the possibility of a breakdown in negotiations. However, with Steve Mnuchin declaring that both sides are enjoying very good conversations, markets are feeling somewhat optimistic that some form of satisfactory solution can be reached,” said IG’s chief market analyst Chris Beauchamp in a note.
Stocks in focus
Air France-KLM AF, -1.75% shares slid 3% as the French-Dutch airline trimmed its full-year guidance, as labor strikes against the company since February led to a wider first-quarter net loss.
Société Générale SA shares GLE, -6.63% dropped 6.7% as the French lender’s first-quarter top-line revenue of €6.29 billion ($7.53 billion) fell short of a €6.4 billion consensus estimate from FactSet. The country’s third-largest listed bank by assets reported a 14% increase in net profit to €850 million ($1.02 billion).
BNP Paribas SA BNP, -2.37% fell 2.7% after France’s largest bank by assets posted a 17% fall in first-quarter profit to €1.57 billion ($1.88 billion). Revenue also declined, to €10.80 billion from €11.30 billion a year ago. Analysts expected revenue of €11.04 billion and net earnings of €1.45 billion.
The losses for the French banks weighed on the Stoxx Europe 600 Bank Index FX7, -0.49% , which gave up 0.8%.
Lanxess AG shares LXS, +8.37% bounced up 5.1% after the German specialty chemicals company raised its guidance for fiscal 2018.
International Consolidated Airlines Group AG shares IAG, +5.56% ICAGY, +3.87% climbed 5.5% after the parent company of British Airways and Vueling said it’s first-quarter adjusted operating profit rose by 75% to €280 million.
HSBC Holdings PLC HSBA, -2.04% HSBC, -2.87% fell 2.2% as the Asia-focused lender posted a rise in operating costs in the first quarter. The bank also said it would buy back another $2 billion in shares.