Europe close: Stocks pop after Powell remarks on tapering
European stocks managed a positive finish on Friday, after Fed chair Jerome Powell said the US central bank was on track to begin tapering by the end of the year.
The pan-European Stoxx 600 was up 0.41% by the end of the day, with Germany’s DAX in positive territory and France’s CAC 40 0.24% firmer.
“European stocks spent most of today treading water, ahead of this afternoon’s comments from Fed chair Jay Powell, before breaking higher in the aftermath of the speech,” said CMC Markets chief market analyst Michael Hewson.
“The clear delineation between the Fed's inflation mandate and its employment mandate, has reassured markers.
“Additionally, the reinforcement of the message that tapering is not tightening, and merely a reflection of the improvement in the economy has helped reassure markets that the central bank is not going to be hasty in removing accommodation.”
Federal Reserve chair Jerome Powell signalled earlier in the afternoon that the bank was on track to start tapering asset purchases later in the year, if the economy continued to show progress.
Speaking at the virtual Jackson Hole symposium, Powell said the US economy had reached the point where it no longer needs monetary support, but also that there are no plans to raise interest rates any time soon.
“At the FOMC’s recent July meeting, I was of the view, as were most participants, that if the economy evolved broadly as anticipated, it could be appropriate to start reducing the pace of asset purchases this year,” Powell said.
“The intervening month has bought more progress in the form of a strong employment report for July.
“The timing and pace of the coming reduction in asset purchases will not be intended to carry a direct signal regarding the timing of interest rate lift off.”
In equity news, shares in Just Eat Takeaway.com, which owns GrubHub, fell 7.49% after New York City Council approved legislation to licence food-delivery apps and permanently cap commissions they can charge restaurants.
Aerospace and defence engineer Babcock reversed earlier gains to fall 0.89%, despite an upgrade to ‘overweight’ from ‘equalweight’ at Barclays, which also lifted its price target to 424p from 315p.
The bank said that following the 2020 restatement, £2bn impairment, accounting policy changes and forthcoming disposal proceeds to mitigate balance sheet risk, Babcock looked set to generate meaningful cash flow from 2024, "returning as an attractive income play".
Norwegian fish farmer Salmar rose 2.47% after the company dropped plans to launch an NOK 11.8bn cash bid for rival Norway Royal Salmon, whose shares slid 11.79%.
French auto parts maker Faurecia gained 2.74% after Citigroup hiked the price target on the company’s stock to €56 from €41.