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European Stocks Close Higher, but Volatility Seen Ahead

European stocks closed in the green on Friday after the two top U.S. economic policymakers said it was not up to the government to rescue bad investments but acknowledged they would intervene to prevent a spillover of the U.S. credit market crisis into the broader economy.

The London FTSE-100 , Paris CAC-40 and Frankfurt DAX were higher. The FTSE CNBC Global 300 also ended up.

Federal Reserve Chairman Ben Bernanke said monetary policy was not to be used as a tool to bail out bad investment bets, but that the Fed is prepared to act if the turmoil had an impact on the economy.

President George Bush took the same stance later in the day when he announced measures to help U.S. homeowners, such as help with refinancing homes and regulation making the mortgage industry more transparent.

"It's not the government's problem to bail out speculators or those who bought houses they can't afford," Bush said.

U.S. stocks were still in positive territory but off their highs, while Asian stocks closed up earlier on hopes about Bernanke's speech.

Volatility Ahead

Many analysts had expected the Fed Chairman to signal a rate cut at the next Fed meeting on Sept. 18, which could appease market worries over the shaken credit markets. But others said this would not help the markets.

In corporate news, Barclays Capital, the investment-banking arm of U.K. bank Barclays, said it would provide financing to a troubled structured investment vehicle it helped set up a year ago. Barclays shares were up 2.7 percent, with investors feeling the string of bad news about the bank may have come to an end.

In France, retailer PPP posted a 54% rise in its first-half net profit, boosted by its newly acquired Puma brand, pushing its shares 5 percent higher. EDF shares gained 0.9 percent after reporting forecast-beating profit from the utility giant's first half.

The week's positive conclusion does not necessarily point to a strong opening for the European markets next week, analysts warned.

"We're in for more volatile trading. The best we can hope for is sideways trading," David Jones from CMC Markets told "European Closing Bell."

Next week all eyes will turn back to Europe where, on Thursday, the European Central Bank's governing council must make a decision on whether it will go ahead with a planned monetary policy rate hike or hold to calm down markets.

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