Workers assemble cars on the assembly line at a Volkswagen automobile factory on March 7, 2025, in Wolfsburg, Germany.
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European stock markets closed higher on Friday, as investors continued to assess the full scope of the European Union’s trade deal with America and hopes rose for a U.S. interest rate cut in September.
The pan-European Stoxx 600 provisionally closed 0.47% higher, with top sectors including mining, autos and travel.
London’s FTSE 100 closed at a record high for the fourth session in a row, adding another 0.13% on Friday to clinch its best weekly performance since May. U.K. stocks have found support this week from gains in mining, retail and defensive stocks, along with Purchasing Managers’ Index data on Thursday showing the strongest business activity for a year.
U.S. markets were also buoyant on Friday after Federal Reserve Chair Jerome Powell suggested interest rate cuts could lie ahead, during a closely-watched speech at the central bank’s symposium in Jackson Hole.
Powell said “the shifting balance of risks may warrant adjusting our policy stance,” which has kept rates on hold since December 2024. However, he also noted that tariffs are causing risks to the inflation outlook.
The dollar slid following the remarks, sending the British pound and euro 1% and 0.8% higher, respectively, against the greenback.
Economists at Deutsche Bank said in a Friday note that the speech was more dovish than expected and that following Powell’s signals, they now expect a quarter-point rate cut in September with follow-ups in December and March.
Trade deal details
On Thursday, officials announced in-depth details of the deal struck between Washington and Brussels late last month. In an agreement reached last month, the EU said it would spend $750 billion on U.S. energy and invest a minimum of $600 billion in the United States — in exchange, blanket tariffs on its goods were set at 15% instead of the 30% rate threatened by U.S. President Donald Trump.
An update on Thursday confirmed those details, and revealed that pharmaceuticals exported from the EU to the U.S. will see tariffs capped at 15%. That alleviated some concerns, as U.S. President Donald Trump had previously threatened to slap the sector with tariffs as high as 250%.
Following a lackluster immediate reaction to the news, the Stoxx Europe Pharmaceuticals and Biotechnology index rose to close around 0.6% higher on Thursday.
On Friday, the index extended its gains by 0.8%. Swiss pharma firm Idorsia, which was up 7.4%, French biotech company Abivax, up 5.5%, and Danish allergy treatment developer ALK-Abello, up 5.7%, were among the top performers in the sector.
Automotive stocks, meanwhile, made gains after closing lower in the previous session as market participants reacted to the “conditional” nature of lower tariffs on the sector. Officials revealed on Thursday that duties on European exports to the U.S. would not be slashed from current levels until Brussels lowers its own industrial duties.
On Friday, the Stoxx Europe Automobiles and Parts index rose by 0.7%, with Stellantis, Mercedes-Benz and Ferrari leading gains.
Elsewhere on Friday, a revised reading of Germany’s gross domestic product showed that Europe’s largest economy shrank by 0.3% over the second quarter, a sharper decline than an earlier reading had suggested.
— CNBC’s Sophie Kiderlin and Jeff Cox contributed to this report.
