Europe close: Dovish Powell sparks late rally as Stoxx 600 nears record

(Sharecast News) - European stocks rallied into the afternoon on Friday, with all major indices across the continent registering solid gains, after dovish comments from head of the Federal Reserve fuelled risk appetite.

The Stoxx 600 finished 0.4% higher at 561.30, just inches away from its record close of 563.13 reached in early March. The index has surged 5% over the month of August alone.

In a hotly anticipated keynote speech at the Jackson Hole conference of central bankers in Wyoming, Fed chair Jerome Powell opened the door to rate cuts, saying that the inflationary impact of Donald Trump's trade tariff regime wasn't as bad as first thought.

"With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance," Powell said.

The Fed head said the evolving risk landscape and baseline economic outlook could justify a recalibration of the Fed's stance, hinting at a growing openness to easing, should incoming data continue to soften. Powell also noted that, despite slowing job growth, the unemployment rate has remained low.

"The whole week has been building up to today's speech by Jerome Powell. For once, the Fed chairman may have done something to please the White House, as he signals that a September cut is now more likely," said Chris Beauchamp, chief market analyst at IG.

"Worries about higher inflation have been cast aside for now, as investors look forward to the US economy powering ahead in the autumn."

Meanwhile, economic data was thin on the ground on Friday, though revisions to German GDP did make some headlines. Final estimates showed that the German economy contracted by 0.3% in the second quarter, lower than the -0.1% initial figure, with industrial production performing worse than assumed.

Market movers

Polish banks slumped as the country's government revealed plans to raise a range of taxes on banks and alcohol in an effort to bolster revenue in next year's budget and support spending on defence and social benefits.

PKO Bank Polski, Bank Pekao, Santander Polska, mBank and Dino Polska were the worst performers across the Stoxx 600, falling by at least 7% each.

AkzoNobel rose strongly after activist investor Cevian Capital took a 3% stake, according to a filing by Dutch market regulator AFM.

Meanwhile, Standard Chartered jumped in London after the bank welcomed what it described as a favourable filing from the US Department of Justice in a long-running civil case involving allegations of sanctions breaches.