LONDON (Reuters) - European shares ended little changed on Friday, underpinned by gains among heavyweight financial stocks, which helped the pan-European STOXX 600 index snap a two-week losing streak.
The STOXX 600 ended 0.1 percent down but rose 0.7 percent on the week, while the export-heavy German DAX .GDAXI index advanced 0.4 percent, shrugging off strength in the euro.
The growing prospect of a grand coalition in Germany boosted sentiment that had kept the DAX stuck around the 13,000-point level for the past two weeks.
“There’s a lot of impetus there to resolve the situation without recourse to another election,” said City Index market analyst Ken Odeluga.
Germany’s Social Democrats said that they were ready to hold talks with other parties on breaking the political deadlock.
“The German political crisis is not really looking very crisis-like,” Paul Donovan, chief economist at UBS Wealth Management, said in a note.
“It is all very orderly and, frankly, a little dull.”
Though corporate news was sparse, shares in consumer staples businesses were in focus after China said it would cut import tariffs on some consumer products.
Banks .SX7P were also in positive territory, up 0.5 percent, with Italian lenders topping the index.
Shares in Banco BPM (BAMI.MI), BPER Banca (EMII.MI) and UBI Banca (UBI.MI) rose by 2.5-5.9 percent after media reports that two European banking directives were in the works in Brussels, aimed at introducing looser rules on disposal of bad loans.
More broadly, investors have been focusing on the brightening economic picture in Europe, which is expected to support the bloc’s equities going forward.
Thursday’s Euro zone PMI data showed business growth gathering pace as the year draws to a close, further buoying sentiment, while growth rates for the bloc have outpaced its peers.
German business confidence rose unexpectedly in November to a record high.
Europe's STOXX 600 has gained 7 percent this year, recouping last year's losses, while Germany's DAX is up 13.8 percent and France's CAC .FCHI has risen nearly 11 percent.
Additional reporting by Danilo Masoni; Editing by Ralph Boulton and David Goodman