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Europe: Stocks dip led by banks at end of strong week

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[LONDON] 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 euro zone stocks both fell 0.3 per cent, while export oriented FTSE slumped 1.1 per cent as the pound spiked higher after a Bank of England policymaker opened the door for a possible rate increase in the coming months.

Banks fell 0.9 per cent after five straight days of gains, showing strain as investors shed the most risky assets, buying defensive sectors such as utilities, up 0.1 per cent.

But 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 attractive valuations capped losses for the region's equities.

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"North Korea had little impact on markets," said Valentin Bissat, equity strategist at Mirabaud Asset Management, 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 FX exchange rate that magnifies returns in USD." Broker rating changes moved some of the top gainers and losers.

Pharma company Grifols dropped 3.3 per cent 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 United States.

Goldman Sachs strategists downgraded the sector to neutral last week citing its sensitivity to US policies.

Cruise provider Carnival dropped 6.2 per cent after Credit Suisse cut its rating to "neutral", citing increasing threats to demand in the top three cruise markets: the Caribbean, Mediterranean and China.

Moeller-Maersk fell 3.3 per cent after BAML downgraded it to "underperform".

Top gainer was PostNL, up 2.1 per cent after Goldman Sachs upgraded the Dutch postal services firm to a buy after recent share price weakness.

H&M shares rose 1.7 per cent, helping the retail sector outperform for the second day, after the world's second largest clothing retailer said autumn sales had started well, though large mark-downs capped its third-quarter sales at 5 per cent.

Goldman Sachs strategists said European stocks continue to attract investors concerned about rich valuations elsewhere, with strong inflows from international and European investors.

Euro zone stocks have outperformed the broader STOXX index year-to-date despite analysts and investors predicting the stronger euro may dent company earnings.

REUTERS