January 26, 2018 / 8:49 AM / a year ago

Euro strength spoils new year rally for European shares

MILAN (Reuters) - European shares edged up on Friday, helped by a solid update from luxury group LVMH but not enough to counter the impact of a rising euro, which spoiled a strong start to the year and left them broadly flat over the week.

A DAX logo is pictured at the trading floor of the stock exchange in Frankfurt, Germany December 29, 2017. REUTERS/Ralph Orlowski

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.

A strong euro typically hurts European exporters whose products become less competitive against rivals producing in a weaker currency.

The STOXX 600 index closed up 0.5 percent, recovering from a one-week low hit in the previous session.

The pan-European index is down 0.1 percent on the week but still up 2.9 percent since the beginning of the year, the past weeks being buoyed by optimism over Europe’s economic and corporate earnings recovery.

LVMH (LVMH.PA) rose 4.9 percent after the world’s biggest luxury goods maker reported higher sales and profits and said it had made a favorable 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 said in a note.

It buoyed shares of other luxury goods companies. Christian Dior (DIOR.PA) and Kering (PRTP.PA) were up 4.2 and 2.6 percent respectively.

Swiss banking software group Temenos (TEMN.S) ended down 3.3 percent but was the biggest gainer in Europe before it denied being approached for a takeover.

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.

Among other gainers were Telia (TELIA.ST), up 3.8 percent, after the telecom operator lifted its dividend, while shares in Michelin (MICP.PA) and Thales (TCFP.PA) were buoyed by upbeat broker comments.

A disappointing update however sent Norwegian insurer Gjensidige (GJFS.OL) down 6.6 percent. The company posted below-forecast profits for the fourth quarter and proposed a lower-than-expected full-year dividend.

Speciality baker Aryzta (ARYN.S) fell 8.8percent as some brokers downgraded the stock following a profit warning that wiped out one fifth of its market value on Thursday.

According to Thomson Reuters data 80 percent of the MSCI Europe companies that have reported so far have beaten fourth-quarter earning expectations and 12 percent have missed them.

Reporting by Danilo Masoni, additional reporting by Julien Ponthus; editing by Ralph Boulton and Toby Davis

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