-43.52 -0.45%_________________________________________________________________________EUROPECarla Mozee
European stock markets largely finished lower Friday, with bank shares taking a hit after their U.S. peers kicked off a new earnings season, but regional equities on the whole marked their best weekly performance in more than two months.
Benchmarks in Germany, France, Spain, Italy and the U.K. each closed in the red, but the Stoxx Europe 600 SXXP, +0.01% managed to finish higher by 0.2%, with commodity shares among its advancers.
The pan-European gauge was also aided by Greek stocks, whose rise left the Athex GD, +0.19% up 0.3% at 856.47. Investors will watch for any word on whether the Greek government will return to the bond market as early as next week.
For the week, Stoxx 600 finished up by 1.8%, the largest percentage gain since the week ended May 5, FactSet data show. Stocks during the week climbed after Federal Reserve Chairwoman Janet Yellen said U.S. interest rates don’t have to rise all that much further.
Banks: But Friday’s session ended with a drop in bank shares that pulled the Stoxx Europe 600 Banks Index FX7, -0.12% down by 0.7%. European lenders followed U.S. bank stocks lower after the release of second-quarter figures from Citigroup Inc. C, +0.34% , J.P. Morgan Chase & Co. JPM, -0.84% and Wells Fargo & Co. WFC, -0.27% .
Those big banks each posted higher-than-anticipated profit, but reported weaker trading revenue, falling short of what analysts had expected and raising questions about what European lenders will say about such revenue when they begin releasing financial results in the coming weeks.
Among major European banks, shares of Deutsche Bank AG DBK, -0.39% DB, -0.40% and Banco Santander SA SAN, -1.04% SAN, -0.89% each fell 0.9%, as did shares of BNP Paribas SA BNP, -0.66%
Bank stocks will be back in focus next week when the European Central Bank releases its next policy decision on Thursday.
“At a time when more central banks are talking about retreating from QE, a more hawkish European Central Bank would also be positive for European banks, with a focus on how quickly and by how much rates could go up,” said analysts at UBS in a research note published Friday.
Increases in short-term lending rates by central banks should lead to higher profit margins for banks.
Euro pops higher: Yellen did say that inflation would be a factor the Fed’s plan to gradually raise rates. But U.S. consumer-price inflation and retail sales figures released Friday fell short of expectations. That send the dollar spiraling lower and the euro leaping by more than 1%. A stronger euro can reduce revenue for European companies that sell their goods and services overseas.
Read: What inflation? Consumer prices flat in June, CPI shows
The euro EURUSD, +0.0872% climbed to $1.1459, up from $1.1399 late Thursday in New York.
Stock movers: Skanska AB SKAB, +1.29% fell 6.2% after the Swedish construction company said it’s writing down roughly 780 million Swedish kronor ($934 million) in certain U.S. and U.K. operations in the second quarter. Operating income for the period is expected at 1.5 billion Swedish kronor, down from 1.7 billion Swedish kronor in the year-ago period.
National indexes: Germany’s DAX 30 index DAX, -0.35% closed 0.1% lower at 12,631.72, and France’s CAC 40 index PX1, -0.10% turned fractionally lower to end at 5,235.31. The U.K.’s FTSE 100 index UKX, +0.35% fell 0.5% to 7,378.39.
Spain’s IBEX 35 IBEX, -0.04% shed 3.2 points at 10,655.10 and Italy’s FTSE MIB I945, -0.03% closed Friday’s session down 0.1% at 21,492.29.
U.S.Barbara Kollmeyer, Anora Mahmudova
U.S. stocks closed higher Friday to score fresh records, following a mixed batch of corporate bank results and poor data on retail-sales and inflation, which led market participants to believe the Federal Reserve is firmly back in a dovish frame of mind.
The Dow Jones Industrial Average DJIA, +0.01% rose 84.65 points, or 0.4% to finish at 21,637.74, its third record close in a row, and the 25th record close for the average this year. The blue-chip average was led higher by gains for Wal-Mart Stores Inc. WMT, +0.04% and Microsoft Corp. MSFT, +0.44% and Intel Corp. INTC, -0.58% Shares of J.P. Morgan Chase & Co. JPM, -0.86% and Goldman Sachs Group Inc. GS, +0.22% were the worst performers on the average.
The S&P 500 index SPX, +0.01% rose 11.44 points, or 0.5%, to finish at a record 2,459.27, its first record close since June 19. All sectors except financials finished in positive territory. Real estate and tech shares finished up 1.1% and 0.9%, respectively.
The Nasdaq Composite Index COMP, -0.06% gained 38.03 points, or 0.6%, to close at 6,312.47, for its sixth-straight positive close. The index finished just shy of its closing record of 6,321.76 set on June 8.
For the week, the main equity indexes posted solid gains, led by a 2.6% rise for the Nasdaq, a 1.4% gain for the S&P 500 and a 1% climb for the Dow.
Additionally, the Dow Jones Transportation Average DJT, -0.45% the Russell 2000 RUT, +0.31% and the Russell 1000 RUI, +0.07% closed at records Friday.
Advances on Wall Street follow weaker-than-expected economic releases. Inflation was flat in June, while a reading of retail sales slumped, emphasizing persistent weakness in that sector and underlining consumer reluctance to spend. The patch of data raises some questions about the Federal Reserve’s ability to quickly normalize monetary policy, as it hopes to do, despite signs of anemic growth and stubbornly low inflation.
“I think this morning’s economic data once again plays into the narrative that the Fed will be more dovish,” said Ian Winer, head of the equities division at Wedbush Securities, in an interview. “It further fuels the sentiment that there’s no alternative for stocks.”
With weak inflation and less hard data pointing to growth, Winer said the Fed is more likely to think twice about raising rates and may even postpone an expected reduction of the $4.5 trillion balance sheet in September.
“Economic surprises continue to tilt toward the downside in the world’s largest economy, suggesting that the Federal Reserve’s hawkish stance earlier in the year could once again prove ill-founded,” said Karl Schamotta, market strategist at Cambridge Global Payments.
“Market participants are increasingly convinced that the central bank’s ‘dot plot’ rate forecast will be adjusted downward, with the yield curve coming under pressure as investors fade the likelihood of rapid monetary tightening,” Schamotta said.
The so-called dot plot refers to a graph of Fed member expectations for rates into the future, while the yield curve is a line that charts yields across every available maturity. A flattening yield curve, showing a narrowing premium between short-dated yields and long-dated Treasurys, has traditionally been viewed as a sign that investors are bearish on economic prospects.
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The lackluster economic data led to a drop in 10-year Treasury yields TMUBMUSD10Y, -1.07% meaning investors bought notes. Treasury yields fell to 2.28% at one point and currently stand at 2.32%. Bond prices and yields move inversely.
Stocks to watch: J.P. Morgan JPM, -0.86% beat expectations on both revenue and profit, but shares gave up an early initial gain to close 0.9% lower.
Citigroup Inc. C, +0.31% reported earnings that were better than expected, but it did show signs of a slowdown in trading, with overall trading revenue down 4% and fixed-income trading revenue off 6%. Shares of the bank closed 0.5% lower.
Wells Fargo & Co. WFC, -0.28% reported second-quarter results that were better than expected but shares fell 1.1%.
Ahead of those results, Wall Street had been expecting banks to deliver a weak quarter, potentially kicking off the latest in a string of disappointing earnings seasons. The shine has come off the sector as hopes have faded that President Donald Trump will push through structural reforms and boost the economy. Disappointment from banks could weigh on the broader market, warned some.
CyberArk Software Ltd. CYBR, +0.14% shares dropped 16% after the cybersecurity firm reported weaker-than-expected earnings, weighing upon other computer security shares.
Read: Four key sectors to watch closely this earnings season
Other markets: In Asia ADOW, +0.15% markets ended the day with modest gains. European stocks finished mostly lower even though the Stoxx Europe 600 SXXP, +0.01% posted a slight gain for its best week in two months. A stronger British pound GBPUSD, -0.3358% was weighing on the FTSE 100 UKX, +0.35% for a second day.
Crude-oil prices CLQ7, -0.92% settled up 1% at $46.54 for a 5.2% weekly gain, while gold GCQ7, +0.55% rose 0.8% to settle at $1,227.50 an ounce for a 1.5% weekly gain.
The dollar DXY, +0.02% followed interest rates lower after disappointing retail sales with the ICE Dollar index falling 0.6% to 95.11, its lowest level in 10 months.
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—Barbara Kollmeyer in Madrid contributed to this article.