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European stocks score strongest quarter since 2015


European stocks ended a volatile trading session mostly higher, with the Stoxx Europe 600 index logging a third quarter of gains.

After a late session push, the pan-European index

SXXP, +0.18%

 closed 0.2% higher at 381.14, extending its weekly gain to 1.2%. For the quarter, which came to an end on Friday, the index scored a 5.5% gain, its biggest quarterly advance since March 2015.

Friday’s choppy session came after the closely watched flash estimate for March inflation showed consumer prices grew 1.5% in the eurozone, down from 2% in February. Analysts had expected a reading of 1.8%.

Part of the inflation drop was due to the Easter effect, as the holiday occurred in March last year, compared with mid-April this year. The Easter holiday tends to push up prices on airfares and hotels, giving a lift to the inflation measure for that month.

However, the decline in March was also because of a slower rise in energy and food prices.

“The marked retreat in eurozone consumer price inflation in March facilitates the ECB sticking to its current monetary policy path. It supports the view that a sustainable firming in underlying eurozone inflation pressures has yet to be established,” said Howard Archer, chief U.K. & European economist at IHS Markit, in a note.

“We suspect the ECB will end up extending its monthly asset purchases into 2018, but at a slowing rate rather than suddenly stopping it,” he added.

After a surprisingly hawkish tone at the ECB’s March 9 meeting, markets started to price in a rate hike as early as December this year. However, according to a Reuters report out earlier this week, some of the central bank’s policy makers felt markets had misinterpreted the message at that meeting and wanted to reassure investors the ECB’s loose monetary policy is nowhere near the end.

Read: Euro bulls just got a wake-up call from the ECB

The euro

EURUSD, -0.0749%

 on Thursday traded around its lowest level in more than two weeks, but recovered slightly on Friday. The shared currency fetched $1.0698, up from $1.0675 late Thursday in New York.

In other economic news, the unemployment rate in Germany unexpectedly fell to 5.8% in March, the lowest rate since the beginning of the data series in January 1992, following the country’s reunification.

French consumer spending fell 0.8% in February, missing forecasts of a 0.1% rise.

Also in a report Friday, U.K. fourth-quarter economic growth was confirmed at 0.7%.

South African jitters: Resource companies posted some of the biggest losses in Europe in part due to political uncertainty in South Africa, which is a major producer of gold and base metals. President Jacob Zuma sacked Finance Minister Pravin Gordhan in a major cabinet reshuffle Friday, and there was speculation Zuma himself may step down in 2018.

Shares of miner Anglo American PLC

AAL, -3.41%

 slid 3.4%, BHP Billiton PLC

BLT, -2.87%

BHP, -1.10%

BHP, -0.12%

 dropped 2.9%, while Rio Tinto PLC

RIO, -2.45%

RIO, -0.69%

RIO, -0.05%

 fell 2.5%.

Financial services providers Old Mutual PLC

OML, -7.51%

 and Investec PLC

INVP, -9.93%

which both are heavily exposed to South Africa, slid 7.5% and 9.9%, respectively.

Brexit update: European Council President Donald Tusk released the EU’s guidelines for negotiating Brexit with the U.K., saying the political union won’t agree to any future trade pact until the British government makes “sufficient progress” on the divorce proceedings. That includes settling the U.K.’s bill with the EU and clarifying citizens’ rights.

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Indexes: Germany’s DAX 30 index

DAX, +0.46%

 ended 0.5% higher at 12,312.87, logging an almost two-year closing high.

France’s CAC 40 index

PX1, +0.65%

 gained 0.7% to 5,122.51.

The U.K.’s FTSE 100 index

UKX, -0.63%

 dropped 0.6% to 7,322.92. The London benchmark still bagged a 2.5% gain for the fourth quarter, its longest quarterly winning streak since 2011.

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