Europe close: Stocks end week on strong note

European markets ended the week on a strong note amid reports that Britain's Conservatives will seek to form a coalition government, thus allowing the UK to see off the threat of new elections while allowing Brexit negotiations to commence on time, and big gains on Wall Street.

"Incoming results suggest a minority Conservative government. We expect greater political instability, with a near-term risk of a second election. Further out, we expect easier fiscal policy and a softer Brexit," Morgan Stanley's Jacob Nell said.

At the closing bell, the benchmark Stoxx 600 was up by 0.32% to 390.39, while Germany's Dax gained 0.80% to 12,815.72, alongside gains of 0.67% to 5,299.71 for the French Cac-40.

Milan's FTSE Mibtel had also recovered by the end of trading, advancing 0.38% to 21,122.42.

Over in foreign exchange markets, the single currency pared a little of its initial gains versus Sterling but was nevertheless still higher by 1.68% to 0.8801 at the close.

Nonetheless, other analysts were less sanguine.

For Fabrice Montagne and Andrzej Szczepaniak at Barclays Research: "because a hung parliament leaves the Prime Minister vulnerable to small groups of MPs intent on influencing the Brexit negotiations, the risks of a ‘No-Deal’ Brexit resulting from a small group of Conservative MPs blocking the ratification of the final agreement have increased."

Acting as a backdrop, markets were also watching whether Italy's main political parties would manage to thrash out a deal to reform the country's election laws, which might lead to snap elections being called later in the year.

Investors, wary of instability in the euro area's third largest economy, were hoping that would not happen.

However, some were speculating that a deal, which fell through the day before, might be renegotiated after the municipal elections scheduled for the next weekend.

Over in Spain, the president of the regional government of Catalonia, Carles Puigdemont, announced he was planning to call for a referendum on independence on 1 October.

In economic news, Germany's trade surplus fell from €25.3bn in March to €18.1bn for April (consensus: €23.0bn).

French industrial production on the other hand shrank by 0.5% month-on-month (consensus: 0.3%).

On the corporate front, Spanish small-cap lender Liberbank cratered 18%, apparently on speculation that like Banco Popular it too was facing liquidity problems.

However, the stock closed far above its worst levels of the day as multiple directors and shareholders weighed in with their support.

Airbus increased its projection for aircraft deliveries over the next 20 years to 34,899, with a value of $5.3trn.

Air France-KLM reported a 6.1% jump in traffic for the month of May amid a 1.6% percentage uplift in its passenger load factor to 85.7%.

Shares in the more domestic-facing UK-listed companies such as Tesco and Taylor Wimpey weakened on the heels of the surprise election result.