Stocks higher on hopes for a Fed rate cut

Finance


European stocks traded higher on Friday as market players increase their bets the U.S. Federal Reserve will cut interest rates this month.

The pan-European Stoxx 600 was up by 0.4% after the opening bell, auto stocks leading the charge with a 1% climb as all sectors except media traded in positive territory.

European Markets: FTSE, GDAXI, FCHI, IBEX

Investors digested comments from a top Fed official that suggested the central bank would implement a pre-emptive “insurance” rate cut aimed at averting a major slump in economic growth.

New York Fed President John Williams said the Fed should “act quickly” while the economy is slowing and rates are low. “It’s better to take preventative measures than to wait for disaster to unfold,” he said in a speech Thursday.

However, a New York Fed spokesperson tried to temper those expectations after Williams’ speech, telling CNBC that his comments were part of an academic talk and “not about potential policy actions.”

Markets in Asia nevertheless got a boost from Williams’ comments. The MSCI’s broadest index of Asian shares excluding Japan jumped 1%.

Meanwhile, geopolitical tensions between the U.S. and Iran have given oil prices a boost. The U.S. Navy shot down an Iranian drone in the Strait of Hormuz, a key chokepoint for global crude flows.

Brent crude futures rose over 2% to $63.22 a barrel, while U.S. light crude futures climbed 1.7% to $56.26.

Elsewhere, investors looked for signs of progress in the U.S.-China trade dispute. U.S. and Chinese officials spoke over the phone Thursday, with Treasury Secretary Steven Mnuchin suggesting face-to-face talks could follow.

French real estate investment trust Gecina climbed 4.7% to top the Stoxx 600 in early trade after it reported earnings for the first half of the year, while AB InBev shares climbed 3.9% after it announced the sale of its Australian unit to Asahi.

At the other end of the European blue chip index, Publicis saw its shares fall 8.5% in early trade to their lowest level since December 2012, after the French advertising giant cut its revenue target following disappointing second-quarter results.

Finnish manufacturer Stora Enso sank 5.2% after it announced a drop in second-quarter profits amid weaker demand.

In terms of corporate earnings, British Land will report full-year results Friday.

As for economic data, German inflation and euro zone growth figures are due in the morning.



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