UKX FTSE 100 Index

By Carla Mozee, MarketWatch

Trump to talk drug prices on Friday

European stocks consolidated around three-month highs Friday, with gains for mining shares helping to guide the regional market toward a likely seventh straight weekly win.

How markets are moving

The Stoxx Europe 600 index rose 0.1% to 392.20, with the basic materials sector putting in the best performance. But the health care and utility groups were in the red. The benchmark on Thursday fell 0.1% (http://www.marketwatch.com/story/european-stocks-rise-for-5th-day-as-banks-rally-after-rbs-settlement-2018-05-10), pulling back from its highest close since Feb. 1, FactSet data showed.

The small lift for the pan-European benchmark came largely from Italian stocks as the FTSE MIB index picked up 0.4%. That index on Thursday slumped 1% as euroskeptic parties moved closer to forming a coalition government (http://www.marketwatch.com/story/italian-antiestablishment-groups-close-to-reaching-coalition-deal-2018-05-10).

Germany's DAX 30 index fell 0.1% to 13,056.00, and France's CAC 40 index lost 0.3% to 5,529.68. The U.K.'s FTSE 100 index was off by 0.1% at 7,695.48 after Thursday's close at the highest level since Jan. 23.

The euro was trading at $1.1908, slipping from $1.1917 late Thursday in New York. The shared currency has fallen about 0.5% this week, on course for a fourth consecutive weekly loss.

Also this week, the Stoxx 600 is on track to rise 1.3%, and that would match a seven-week run of advances that ended in March 2015.

What's driving markets

Metals producers led advancers Friday, with the move sending the Stoxx Europe 600 Basic Materials index up 1.1%. The group was led by a rise in shares of ArcelorMittal SA after the steelmaker logged a rise in quarterly profit.

But health care shares lagged behind before a speech expected later Friday by U.S. President Donald Trump about drug prices. His administration has said it will issue several proposals to lower prescription drug prices (http://www.marketwatch.com/story/five-things-to-expect-again-from-president-trumps-upcoming-drug-price-speech-2018-04-19) and pass discounts to patients. The Stoxx Europe 600 Health Care index fell 0.9%.

Investors will keep tabs on developments from Italy where leaders of Italy's far-right League party and populist 5 Star Movement on Thursday moved closer to creating a coalition government, potentially putting an end to more than two months of political gridlock.

That coalition would create one of Europe's biggest euroskeptic alliances, and there's concern that may hurt Italy's relationship with the European Union and throw the Italian economy into disarray.

The yield on 10-year Italian government bonds fell 3 basis points to 1.901%, according to Tradeweb. Yields fall when prices rise. The 10-year yield this week hit its highest since mid-March as investors sold off Italian debt, signaling investors are becoming more nervous about the country's finances. In turn, investors demand a higher risk premium to buy the bonds.

What are strategists saying?

"Sterling markets have interpreted today's [BOE] decision and inflation report as moderately dovish with the pound initially falling. In our view, this reaction seems somewhat overdone," said Dean Turner, U.K. economist at UBS Wealth Management, in a note.

"Undoubtedly, the tone from the bank has shifted from a hawkish stance in February to a more balanced one today, but we don't see this as outright dovish. We believe the pound should recover some of its losses in the months ahead as the data confirms that the first quarter slowdown was nothing more than a temporary glitch," he said.

"Improving sentiment amid de-rated prices was backed by a more contained assessment of geopolitical risks--chiefly Iran-U.S.--continuing 'goldilocks' economic conditions and the return of policy divergence versus the Fed. This offered the chance of a global reset following a tough first quarter," said Ken Odeluga, market analyst at City Index, in a note.

"A mild pullback though, at the time of writing, across U.S. stock index futures, FTSE, DAX and STOXX, was a reminder that the easier dollar scenario taking shape was still equivocal," he added.

Stock movers

Sika AG (SIK.EB) jumped 9.8% after the founding family of the Swiss specialty chemicals maker and Compagnie de Saint-Gobain SA (SGO.FR) agreed to end their long-running legal dispute with Sika's management. French building materials company Saint Gobain will give up its fight to take control of Sika, but will purchase Schenker-Winkler Holding AG (http://www.marketwatch.com/story/saint-gobain-sika-and-burkard-family-end-dispute-2018-05-11) from the Burkard family for 3.22 billion Swiss francs ($3.21 billion).

ArcelorMittal MT (MT) climbed 2.5% as the steelmaker said first-quarter net profit rose to $1.19 billion (http://www.marketwatch.com/story/strong-steel-prices-boost-arcelormittal-profit-2018-05-11) from $1 billion a year earlier, due in part to higher steel prices. Shares of other metals producers rose, with steel products maker Voestalpine AG (VOE.VI) up 1.3% and aluminum manufacturer Norsk Hydro SA (NHYDY) gaining 0.8%.

John Wood Group PLC (WG.LN) bounced up 6.9% as the energy-services company posted an upbeat first-quarter trading statement (http://www.marketwatch.com/story/wood-group-sees-upbeat-trading-momentum-in-1q-2018-05-11).

(END) Dow Jones Newswires

May 11, 2018 04:55 ET (08:55 GMT)

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