Europe open: Shares crawl higher as investors eye US Fed, Treasury row

European stocks opened the final session of the week slightly higher after modest gains on Wall Street as investors kept an eye on a potential spat between the US Federal Reserve and the Treasury.

The pan-European STOXX 600 index was up by 0.28%. Italy’s FTSE MIB rose 0.6% on bank merger news, while the UK’s FTSE 100 rose after retail sales data. US futures indicated a weaker opening on Wall Street with the Dow 121 points lower.

Investors were concerned about a potential dispute between US Treasury Secretary Steven Mnuchin and the outgoing Trump administration over a coronavirus fiscal package.

Mnuchin said key pandemic lending programs at the Federal Reserve would expire on December 31.

“There are also fears of a rift developing between the Treasury and the Federal Reserve in how to tackle the next stage of the economic hit,” said interactive investors head of markets Richard Hunter.

“While there are some glimmers of hope for a new fiscal package in the new year, any discord between the two bodies threatens to rattle investor sentiment, where continued monetary and fiscal support has been seen as a given throughout the health crisis.”

In the UK Figures released earlier by the Office for National Statistics showed retail sales rose for the sixth consecutive month in October, underpinned by the online segment, while government borrowing hit its highest level on record for that month but was still lower than expected.

Public sector net borrowing was £22.3bn in October, up £10.8bn from the same month last year and marking the sixth-highest borrowing in any month since records began in 1993, as the government continued to spend amid the pandemic. However, it was lower than the consensus forecast of £37.2bn.

Separate figures from the ONS showed retail sales rose 1.2% on the month in October, down from 1.5% growth in September but ahead of expectations for no growth. On the year, sales were 5.8% higher, coming in ahead of expectations for a 4.2% increase.

In equity news, Italy's BPER Banca rose 3.1% after the top investor in the bank threw its weight behind the idea of a merger with rival Banco BPM.

Thyssenkrup shares rebounded after Thursday's sharp fall in reponse to a poor profits report and the announcement of more job cuts.

Shares in accounting software firm Sage slumped 10% even after the company lifted its dividend and reported an 8.5% rise in organic recurring revenue rose to £1.6bn, driven by growth from existing and new customers, principally in North America and Northern Europe.