Europe Markets: European stocks limp lower, but log best year since 2013

European stocks faded on Friday, ending slightly lower, but still registering the best year since 2013.

What are markets doing?

The Stoxx Europe 600 index SXXP, -0.09%  slipped 0.4% to close at 389.18, in seasonally light trade on the last trading day of the year.

For 2017, the pan-European benchmark logged a 7.7% advance, representing its biggest annual jump since its 17% in 2013.

Germany’s DAX 30 index DAX, -0.48%  fell 0.5% to close at 12,917.64 on Friday, trimming its yearly gain to 12.5%.

France’s CAC 40 index PX1, -0.50%  lost 0.5% to 5,312.56, notching a 9.3% 2017 gain.

The U.K.’s FTSE 100 index UKX, +0.85%  rose 0.9% to 7,656.34, closing at an all-time high and bagging a 7.6% yearly gain.

The euro EURUSD, +0.5610%  rose to $1.2010 from $1.1943 late Thursday in New York. For the full year, the shared currency was on track for a 14% rise against the dollar.

Read: Dollar set to suffer worst year since 2003 with 10% yearly loss

What’s been driving the markets?

Stocks globally have had a stellar year, but European stocks have underperformed largely due to the strong euro. A stronger currency makes European products more expensive for foreign buyers, hurting the continent’s many major export companies.

Technology companies, in particular, have had a bumper year, which is one of the reasons the U.S.’s Nasdaq Composite Index COMP, -0.34%  is up almost 30% on the year. Europe’s tech companies FX8, -0.34%  have rallied 20% in 2017, making it one of the best performing sectors in the Europe. Tech stocks make up a smaller portion of the market in Europe than in the U.S.

Mining stocks have also had a strong year, helped in part by a late-2017 rally in metals prices. The Stoxx Europe 600 basis resources index SXPP, +0.89%  is up 19.3% for the full year.

What are strategists saying?

“We are constructive on European equities heading into 2018 and think the cyclical bull market has further to run. We see upside risks to EPS forecasts (which is for 11% EPS growth) and buoyant corporate activity should provide support to valuations and the growth outlook,” strategists at Bank of America Merrill Lynch, said in their year-ahead outlook.

Read: 4 reasons Wall Street banks have the hots for Europe in 2018

Bank European stocks Potential upside* U.K.’s FTSE 100 Potential upside*
J.P. Morgan MSCI Europe: 1,720 +6.3% 7,750 +1.7%
Morgan Stanley MSCI Europe: 1,700 +5.1% 7,780 +2.1%
Goldman Sachs Stoxx 600: 420 +7.8% 8,000 +5%
Citigroup Stoxx 600: 460 +18.1% 8,200 +7.6%
Deutsche Bank Stoxx 600: 395 +1.4% 7,500 -1.6%
Société Générale Stoxx 600: 385 -1.2% 7,000 -8.2%
UBS Stoxx 600: 440 +13% 7,900 +3.6%
Bank of America Stoxx 600: 430 +10.4% N/A N/A
Average N/A +7.6% 7,733 +1.4%
* compared with Dec. 28’s close
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