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European stocks erase their advance

Paris - European stocks erased early gains as simmering investor concern over the region’s political risks undercut banking shares, offsetting a rally in mining stocks that followed better-than-expected export data from China.

The Stoxx Europe 600 Index was little changed at 14:25, after gaining as much as 0.4% and reaching its highest level since January 26. As the banks sector renewed its selloff, the basic-resources stocks advanced 2%, headed for their best advance in two weeks.

That sector has gained more than 9% this year, while the Stoxx 600 is up 1.4%.

The Stoxx banking index’s 0.9 drop brought its decline to more than 5% since an intraday peak on January 26.

The sector index was testing its 50-day moving average again. Among the top decliners are Mediobanca and Societe Generale, both down more than 2%, while Commerzbank fell 2.1%, headed for a fifth decline this week.

A poll on Friday signaled support for French far-right candidate Marine Le Pen for the first round of France’s presidential election has increased one point to 26%.

The spread between France and Germany’s bonds hovered near a four-year high reached earlier this week, signaling concern over the coming French elections. Raw materials companies got a boost from data that showed Chinese exports rose 7.9% in dollar terms in January, the fastest pace in almost two years, while ArcelorMittal surged 4% after reporting a 20% profit increase, helped by a rally in steel and iron prices.

Following a  sharp rally in global stocks, history shows that in 75% of such cases the market continues to move higher over the following 12 months, Citi equity strategists including Robert Buckland wrote in a note.

Strategists at Bernstein are more cautious, writing in a note that they are worried that market sentiment has reached complacent levels, particularly in the face of political uncertainty, and suggest investors tactically hedge global equity positions.

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