STOXX 600 Climbs as Powell Signals Rate Cuts

Europe's STOXX 600 surged near session highs, driven by broad-based gains after Federal Reserve Chair Jerome Powell indicated potential interest rate cuts. The index rose 0.5% to its highest in over three weeks, marking a third consecutive weekly gain. Powell's remarks at Jackson Hole fueled market optimism.

Europe's STOXX 600 ended near session-highs amidst broad-based gains on Friday, as global markets advanced after Federal Reserve Chair Jerome Powell stated that 'the time has come' to reduce interest rates.

The pan-European STOXX 600 index rose 0.5% to 518.13 at close, its highest level in over three weeks and clocking a weekly advance for the third straight week. Speaking at the economic symposium at Jackson Hole in the U.S., Powell offered an explicit endorsement of an imminent policy easing, saying further cooling in the U.S. job market would be unwelcome and expressed confidence that inflation was within reach of the U.S. central bank's 2% target.

'The jury is still out if the Fed can successfully manage the risks to both sides of their dual mandate. However, Chairman Powell could not be more clear – 'the time has come for policy to adjust,'' Jeffrey Roach, chief economist at LPL Financial noted. Money market participants are all but certain about a rate cut in September, with 65.5% leaning towards a 25-basis-points one, as per the CME FedWatch Tool.

Rate-sensitive real estate jumped 1.3%, hitting an over 18-month high, while utilities, often noted as a bond proxy, gained 1%. Euro zone government bond yields slipped, in-line with their U.S. counterparts, with the yield on the German 10-year note, considered as the region's benchmark, last at 2.229%. Most local bourses clocked gains, with Germany's benchmark touching one-month highs, while the Spanish bourse scaled an over two-month high. The tech sub-index lagged the broad rally, falling 0.6%, bogged down by 1.7% fall in Dutch firm ASML.

Meanwhile, a Reuters report showed that a growing number of European Central Bank policymakers are lining up behind another interest rate cut in September and only major data surprises in the coming weeks could delay the move. Speaking at Jackson Hole, Bank of England Governor Andrew Bailey said he thought inflation pressure in Britain's economy was becoming less stubborn than in recent years. Among other headlining stocks, ALK-Abello jumped 12.2%, topping the STOXX 600 after the Danish allergy solutions maker beat second quarter revenue estimates and raised its full-year outlook. UK's Melrose Industries declined 7.1% after brokerage UBS double downgraded the aerospace components supplier's rating to 'sell' from 'buy'. Nestle closed 0.1% higher after falling as much as 4% during the day. Three sources familiar with the matter told Reuters that the world's biggest foodmaker's CEO Mark Schneider was ousted in a sudden move as a result of the group's underperformance.

(With inputs from agencies.)