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European stocks close higher despite political uncertainty

Key Points
  • On Wednesday, the Federal Reserve hiked its benchmark interest rate by a quarter point, as expected by many investors.
  • Elsewhere, tensions between the U.S. and major economies continued to be in focus.
  • Traders also monitored Italy, amid worries over the country's budget and deficit targets for next year.

European stocks bounced back Thursday afternoon, as investors shook off concerns around trade and political uncertainty.

The pan-European STOXX 600 provisionally ended 0.35 percent higher, with sectors and major bourses mostly positive. The FTSE 100 finished the day 0.5 percent higher while the main equity markets in Germany and France also made solid gains. 

European Markets: FTSE, GDAXI, FCHI, IBEX

Looking at Europe's corporate space, Germany's Thyssenkrupp said on Thursday that it plans to spin off its capital goods divisions into a separately listed company. The firm had been under pressure for years to restructure the business. A decision will be made on Sunday, Thyssenkrupp said. Shares of the industrial firm shot up almost 10 percent.

H&M posted its latest earnings update, which saw pretax profit for the third quarter miss expectations. Shares of the Swedish retailer, however, soared more than 11 percent, making it the top performer in Europe, after it reassured investors that it wouldn't need to cut costs further in order to shift unsold clothing.

At the other end, pharmaceuticals firm Indivior was one of the STOXX 600's biggest losers, falling 13 percent after slashing its revenue outlook for Sublocade, an opioid addiction drug. In a release published Wednesday afternoon, Indivior said it had "substantially underestimated" the time it took for the drug's approval of medical benefit coverage to arrive to individual patients.

IG Group was also among the continent's worst performers, sinking more than 12 percent after the British firm announced that its chief executive, Peter Hetherington, would be stepping down from his role with immediate effect.

Political rumblings

On Wall Street, stocks rose as shares of Apple led tech shares higher. J.P. Morgan initiated the stock with an overweight rating, setting its price target at $272 — 23 percent higher than the stock's last closing price.

The Federal Open Market Committee (FOMC) on Wednesday hiked its benchmark interest rate by a quarter point, and went on to add that one more hike was projected in 2018 — with three more were penciled in for 2019. Markets came under pressure that day, when Chair Jerome Powell told reporters that he didn't see inflation surprising to the upside — a comment that triggered bond yields to drop.

Tensions between the U.S. and major economies continue to be in focus for global traders. In the latest surrounding the tit-for-tat trade war with China, President Donald Trump accused China of intending to interfere with the upcoming U.S. congressional elections this November. He stated that the Asian nation didn't want the Republican Party to perform well, due to his recent war-of-words with China on trade.

Trump however did not provide any evidence towards this allegation; and this claim prompted an immediate rejection from Beijing, who said that they didn't intrude on any country's domestic matters.

Sticking with trade, Trump also took aim at Canada, criticizing the U.S. neighbour for its slow pace of discussions concerning the overhaul of NAFTA. The U.S. president went onto threaten Canada with levies, and stated that he had recently vetoed Prime Minister Justin Trudeau's invitation for a one-on-one meeting — a claim that prompted a spokesman of Trudeau's government to state that no such meeting had been requested.

Looking closer to home, investors are tracking news coming out of Italy, amid concerns surrounding the country's budget and deficit targets for next year and infighting in the government.

At the European closing bell the yield on 10-year Italian debt was at 2.89 per cent, having risen to 2.99 per cent earlier in the day, its highest level in two weeks.

Media reports have suggested that the populist parties in charge in Italy, are pressing the finance minister to resign, if he doesn't deliver the pledges they made in the campaign. A spokesperson for the finance minister told CNBC the rumours are "fake news" and Giovanni Tria is focused on the budget numbers.

The euro extended losses seen earlier in the session, falling 0.62 percent versus the dollar to $1.1666 amid concerns over Italy. There are also concerns the coalition government's 2019 budget could be delayed. However, the government said in a statement Thursday it will meet at 6 p.m. GMT (2 p.m. ET) to set its economic goals for the next three years.

In Brexit news, Chancellor of the Exchequer Philip Hammond tweeted on Wednesday that the autumn budget statement would be presented earlier than usual, on October 29, ahead of a vital Brexit summit scheduled in November. Britain's FTSE 100 was almost half a percent higher, boosted by sterling weakness as traders monitored the latest headlines around Brexit.