UKX FTSE 100 Index

By Carla Mozee, MarketWatch

Euro trading around March lows

European stocks finished flat Friday, with some indexes easing from multimonth highs as investors waded through corporate reports while they considered European Central Bank President Mario Draghi's hint toward the possibility of more monetary stimulus.

The Stoxx Europe 600 index finished unchanged at 344.29 after zigzagging between small gains and losses throughout the session. Technology, telecom, financial and commodity shares moved up, while consumer shares, health care, utility and industrial issues fell.

European indexes that fell included Portugal's PSI 20 index , closing down 0.2% at 4,726.43. Investors waited for a decision, expected late Friday, on whether ratings agency DBRS would cut the country from an investment grade rating.

DBRS is the last of four agencies to hold Portugal at investment grade, and a downgrade could led Portugal to lose access to the ECB's bond-buying program, resulting in higher funding costs for the country and financial institutions.

The yield on Portugal's 10-year bond fell 2 basis points to 3.17% as prices rose.

For the week, the Stoxx 600 ended higher by 1.3%.

Policy path: The pan-European index on Thursday reversed losses (http://www.marketwatch.com/story/european-stocks-slip-as-ecb-caution-creeps-in-2016-10-20) after Draghi said the bank's quantitative easing program won't come to a "sudden stop". Policy makers at this week's meeting didn't discuss either way whether to end the program or extend it beyond March, he said.

French and German blue-chip indexes on Thursday closed at their highest in six weeks after Draghi's comments. On Friday in Paris, the CAC 40 shed 0.1% at 4,536.07. In Frankfurt, the DAX 30 barely dodged a loss.

"There is not a clear direction yet as to what is going to happen to the ECB's monetary policy. The enthusiasm has waned and now were looking for the next piece of information that will confirm a direction," said Nicolas Shamtanis, chief market analyst at EasyMarkets.

The prospect of further stimulus left the euro on Friday trading at its lowest since March. It bought $1.0868, down from $1.0929 late Thursday.

Equity markets still hold the potential to gain ground until the ECB clarifies its position, which will most likely happen in December, said Shamtanis. Gains would "mainly stem from the euro's weakness as Europe is a very export-oriented [region]," he said.

"That being said...there are a lot of things that could hinder such an advance. We have concerns about capitalization of European banks ... the Italian referendum on the fourth of December, and Brexit, of course," he added. "So it's a very fragile time to be an investor in equities. However, as long as the euro drops further ... the upside [for stocks] is more probable than a correction at these levels."

For the euro, the door is currently "open for a drop to $1.0820 and in the medium-to-long-term horizon, $1.05 seems to be the next support the euro is heading toward," he added. The key factor determining the euro's direction is the interest-rate differential between the U.S. and the eurozone, which is expected to widen further if the Federal Reserve raises rates in December, Shamtanis said.

Movers: British American Tobacco PLC shares (BATS.LN) fell 2.7%. They had been higher for much of the day after the Lucky Strike cigarettes maker proposed buying the stake in Reynolds American Inc (http://www.marketwatch.com/story/bat-in-47-billion-offer-for-reynolds-stake-2016-10-21). (RAI) that it doesn't already own for $47 billion.

Burberry shares (BRBY.LN) (BRBY.LN) rose 3.1% following a report the British luxury-goods maker may merge with Coach Inc (http://www.marketwatch.com/story/coach-burberry-shares-jump-after-report-on-potential-20-billion-merger-2016-10-21).(COH) in a $20 billion deal.

Ericsson AB shares (ERIC) dropped 5.9% after the Swedish telecom-equipment maker swung to a third-quarter loss (http://www.marketwatch.com/story/ericsson-plunges-to-loss-hit-by-asia-competition-2016-10-21) of 233 million Swedish kronor ($26.2 million), hurt by a slowdown in the market.

Valeo SA shares (FR.FR) climbed 3% after the auto parts supplier raised its full-year 2016 operating-margin target to around 8%.

Outside of the Stoxx 600, 3-D printing firm Arcam AB (ARCM.SK) closed 3.6% lower following news that General Electric Co.'s (GE) move to buy the company looks set to fail (http://www.marketwatch.com/story/ges-3-d-printing-buys-set-to-fail-after-activist-elliott-intervenes-2016-10-21-81032344).

Indexes: Germany's DAX 30 index turned higher to end up 0.1% at 10,710.73. The 10,800 area represents a "a huge technical resistance and a break at that level would open the way to revisit 11,000-plus levels," which haven't been seen since November 2015, said Shamtanis.

Spain's IBEX 35 rose 0.4% to 9,100.40 and the U.K.'s FTSE 100 index shed 0.1% at 7,020.47.

The pound traded at $1.2231, down from $1.2252 late Thursday.

(END) Dow Jones Newswires

October 21, 2016 12:19 ET (16:19 GMT)

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