UPDATE 2-STOXX closes up; French stocks outperform on expectations of new budget

European shares eked out gains on Friday, with French stocks logging their biggest daily rise in three weeks as investors factored in a potential budget despite ongoing political uncertainty, while also parsing an upbeat U.S. jobs report. The pan-European STOXX 600 was up 0.1%, logging its seventh consecutive day in advances and its strongest weekly performance in ten.

European shares eked out gains on Friday, with French stocks logging their biggest daily rise in three weeks as investors factored in a potential budget despite ongoing political uncertainty, while also parsing an upbeat U.S. jobs report.

The pan-European STOXX 600 was up 0.1%, logging its seventh consecutive day in advances and its strongest weekly performance in ten. French assets saw a relief rally after President Emmanuel Macron said he would appoint a new prime minister in the coming days whose top priority will be getting a 2025 budget adopted by parliament, after the government was toppled by lawmakers.

The country's benchmark CAC 40 index rose 1.3% to touch a fresh three-week high. The index also logged its steepest weekly rise in ten, trimming its annual drop to 1.5% from over 3% earlier in the week. French bond yields also dropped. However, Andrew Kenningham, chief Europe economist at Capital Economics, struck a cautious tone as he said, "The key point as far as French politics is concerned is that there is no realistic prospect of a stable government being formed with a mandate to address France's fiscal problems."

"And there is a risk that the current deadlock drags on and that the next legislative elections... don't solve the problem." European luxury stocks jumped 3% and touched a two-month high, with Italy's Moncler among the top gainers with a 5% rise after Goldman Sachs upgraded its shares to "buy".

Germany's DAX closed higher by 0.1% to clinch an all-time high and logged its biggest one-week rise in over two months even as political uncertainty prevailed. Across the Atlantic, data reflected a resilient jobs market in the U.S., and investors priced in that the Federal Reserve is on track to cut rates in December.

Among other movers, Vivendi rose 1.9%. The French media conglomerate will seek shareholder approval on Monday for a proposed break-up of the group. Direct Line rose 5.6% after the British insurer said it was set to recommend a sweetened 3.61 billion pound ($4.60 billion) cash-and-stock takeover by Aviva, if the bigger rival makes a formal offer.

Puig Brands fell 3.5%, having shed as much as 9% earlier, after the Spanish cosmetics company said its Charlotte Tilbury brand was conducting a global withdrawal for select batches of its make-up setting spray. BMW rose 2.7% after Jefferies upgraded the German automaker's stock to "buy" from "hold".

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