European stocks traded cautiously higher on Friday as market players increase their bets the U.S. Federal Reserve will cut interest rates this month.
European Markets: FTSE, GDAXI, FCHI, IBEX
The pan-European Stoxx 600 was trading just above the flatline toward midday, having pared earlier gains. Industrials were the strongest performers with a 0.7% climb while media stocks fell 0.7% on the back of a sharp share price fall for French advertiser Publicis.
Markets were initially buoyed by comments from a top Fed official on Thursday 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.”
Meanwhile, geopolitical tensions between the U.S. and Iran have given oil prices a boost. The U.S. said it had shot down an Iranian drone in the Strait of Hormuz, a key chokepoint for global crude flows. But Iran later denied the claims.
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.
In terms of individual stocks, shares of Galapagos climbed 7.1% in morning trade after KBC Securities raised its price target on the Amsterdam-listed stock. AB InBev shares climbed 4.3% 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.
As for economic data, the European Central Bank said Friday that in the 12-month period to May, the euro zone’s current-account surplus widened to 30 billion euros ($33.7 billion) from 22 billion in April.