UKX FTSE 100 Index

By Carla Mozee, MarketWatch

K+S shares gain; parent of retailer Primark upgraded

European stocks ended higher Tuesday, with shares in exporters rising in response to a weaker euro as investors prepared for the possibility of a U.S. interest rate increase in September.

The Stoxx Europe 600 index rose 0.5% to settle at 344.75. The index on Monday shed 0.2% (http://www.marketwatch.com/story/european-stocks-slump-as-yellens-rate-hike-message-sinks-in-2016-08-29).

The German and French indexes outperformed the pan-European benchmark on Tuesday. Frankfurt's DAX 30 index closed 1.1% higher at 10,657.64, while the CAC 40 index in Paris rose 0.8% to 4,457.49.

Among individual stocks, German auto maker Volkswagen AG (VOW.XE) (VOW.XE) rose 2% and French car maker Peugeot SA (UG.FR) advanced 1.4%.

At the same time, the euro fell against the U.S. dollar. European exporters such as auto makers tend to benefit when the euro weakens, as it makes their products less expensive to buy for holders of other currencies.

The greenback has advanced since Federal Reserve Chairwoman Janet Yellen said late last week that the case for a U.S. rate increase has strengthened.

At this point, sentiment "in the stock markets...remains positive despite a slightly more hawkish Federal Reserve. This is mainly because...central banks elsewhere are pretty much dovish, most notably in Japan, the eurozone and now the U.K.," wrote Fawad Razaqzada, market analyst at Forex.com.

"A small rate rise in the U.S. would not be the end of the world anyway, though it may put further upward pressure on dollar. This in turn should translate into stronger [dollar/yen] and weaker [euro/U.S. dollar] exchange rates," he said.

"Consequently, the export-oriented stock markets in Japan and Germany could start to outperform the U.S. going forward, provided that Friday's U.S. jobs report does not put to bed talks of a 2016 rate rise once and for all," Razaqzada said.

The European Central Bank will hold its own policy meeting on Sept. 8. Ahead of that, "there's been more narrative" about the prospect of the ECB extending its corporate-bond purchasing program, said Tony Cross, market analyst at Trustnet Direct.

"That could be driving sentiment," Cross said.

Movers: Shares of German potash and specialty fertilizer group K+S AG (SDF.XE) climbed 4% following a Bloomberg report that Potash Corp (POT) and Agrium Inc. (AGU.T) are preparing a merger agreement. Potash last October dropped its pursuit of K+S.

Wirecard AG shares (WDI.XE) pushed up 3% after Barclays raised its rating on the payment processing services company to overweight from equalweight.

Associated British Foods PLC (ABF.LN), which runs sugar operations and the retailer Primark, was upgraded to outperform from sector perform at RBC. Shares rose 3.4%.

Other indexes: Italy's FTSE MIB rose 1.4% to 16,891.42. Bank shares on the index advanced, with UniCredit SpA (UCG.MI) up 2.2%. Spain's IBEX 35 gained 0.8% to 8,685.40.

In London, the FTSE 100 declined 0.3% to finish at 6,820.79 (http://www.marketwatch.com/story/ftse-100-seesaws-with-miners-under-pressure-after-holiday-2016-08-30).

Data: German inflation unexpectedly slowed to a rate of 0.3% in August on the year, dragged mainly for a pullback in energy prices. Analysts polled by FactSet had expected a rate of 0.5%.

A final reading of minus 8.5 of European consumer confidence in August from the European Commission met market expectations.

(END) Dow Jones Newswires

August 30, 2016 12:16 ET (16:16 GMT)

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