December 15, 2016 / 8:44 AM / a year ago

Banks lead European shares higher after Fed, EDF slumps

LONDON, Dec 15 (Reuters) - European shares rose slightly on Thursday helped by gains in bluechip, global banks following the U.S. Federal Reserve’s interest rate hike overnight, while growing corporate deal activity continued to underpin year-end optimism.

The pan-European STOXX 600 index was trading up 0.2 percent inching back towards an 11-month high.

BNP Paribas, up 3 percent, was the top boost on the index with peers Societe Generale and Barclays also up between 2 and 3 percent.

Shorter-dated U.S. Treasury yields surged on Wednesday, with those on two-year notes climbing to their highest in more than seven years after the Federal Reserve raised interest rates for the first time in a year and flagged more rate increases in 2017.

Higher yields are a boon to banks’ profitability.

Also helping financials, Italian banks rose 2 percent and were on course for a third straight week of gains.

Italian banks have staged a rebound since the appointment of Paolo Gentiloni as the country’s prime minister on expectations that a stable political environment would help ailing banks to recapitalizes. Gentiloni won the backing of the fragmented Senate on Wednesday, allowing his government to formally take office.

On the other end of the table, shares in French utility EDF fell more than 12 percent, poised for their biggest drop since June, after the company warned of lower earnings in 2017.

Mining shares, the year’s best performers in Europe, also lost ground with the sector index falling 1.2 percent on a firmer dollar that generally makes commodities costlier for other currency holders. (Reporting by Atul Prakash, Editing by Vikram Subhedar)

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