European shares dipped on Friday as another North Korean missile launch softened appetite for riskier banks and miners, but still scored their strongest week since July as attractive valuations tempted investors.
The pan-European STOXX 600 and eurozone stocks both fell 0.3 percent, while the export-oriented FTSE slumped 1.1 percent as the pound spiked higher after a Bank of England policymaker opened the door for a possible rate increase in the coming months.
The STOXX 600 on Friday closed at 380.71, an increase of 1.4 percent from 375.51 on Sept. 8.
The FTSE on Friday ended at 7,215.47, down 2.2 percent from a close of 7,377.60 a week earlier.
Banks fell 0.9 percent after five straight days of gains, showing strain as investors shed the most risky assets, buying defensive sectors such as utilities, up 0.1 percent.
However, European stocks posted their strongest week in two months, having hit a five-week high on Thursday as they recovered from a summer dip.
Investors and analysts said that attractive valuations capped losses for the region’s equities.
“North Korea had little impact on markets,” said Valentin Bissat, equity strategist at Mirabaud Asset Management SA, which upgraded its exposure to European stocks on Monday.
“European equities continue to benefit from solid growth, and US investors also continue to be invested in European equities with more interesting valuation and the positive [foreign exchange] exchange rate that magnifies returns in US [dollars].”
Broker rating changes moved some of the top gainers and losers.
Pharmaceutical Grifols SA dropped 3.3 percent as Kepler Cheuvreux analysts said a recovery in margins could take longer than expected, removing the stock from their Iberian top picks.
They pointed to the weaker US dollar weighing on Grifols, which like many European healthcare companies is highly exposed to the US.
Goldman Sachs Group Inc strategists last week downgraded the sector to neutral, citing its sensitivity to US policies.
Cruise provider Carnival Corp dropped 6.2 percent after Credit Suisse Group cut its rating to “neutral,” citing increasing threats to demand in the top three cruise markets: the Caribbean, the Mediterranean and China.
AP Moeller-Maersk Group fell 3.3 percent after Bank of America Merrill Lynch downgraded it to “underperform.”
The top gainer was PostNL NV, up 2.1 percent after Goldman Sachs upgraded the Dutch postal services firm to a buy after recent share price weakness.
H&M Hennes & Mauritz AB shares rose 1.7 percent, helping the retail sector outperform for the second day, after the world’s second-largest clothing retailer said autumn sales had started well, although large markdowns capped its third-quarter sales at 5 percent.
Goldman Sachs strategists said European stocks continue to attract investors concerned about rich valuations elsewhere, with strong inflows from international and European investors.
Eurozone stocks have outperformed the broader STOXX this year, despite analysts and investors predicting the stronger euro might dent company earnings.
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