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European stocks close slightly higher as investors await Fed rate decision

Key Points
  • New York Fed President John Williams says the Fed should "act quickly" while the economy is slowing and rates are low.
  • Oil prices jump after the U.S. Navy shoots down an Iranian drone in the Strait of Hormuz, a key chokepoint for global crude flows.
  • U.S. and Chinese officials discuss trade over the phone; Treasury Secretary Steven Mnuchin suggests face-to-face talks could follow.

European stocks were little changed on Friday as market players awaited news on whether the U.S. Federal Reserve will cut interest rates this month.

European Markets: FTSE, GDAXI, FCHI, IBEX

The pan-European Stoxx 600 hovered around the flatline during afternoon trade and ended the session up provisionally 0.1% higher with sectors and major bourses pointing in opposite directions. Basic Resources were the strongest performers with a 1.1% climb, while bank stocks were 0.9% lower as Italian banks declined amid tension between the two parties of the nation's coalition government.

Markets were initially buoyed by comments from a top Fed official on Thursday that suggested the central bank would implement a pre-emptive "insurance" rate cut aimed at averting a major slump in economic growth.

New York Fed President John Williams said the Fed should "act quickly" while the economy is slowing and rates are low. "It's better to take preventative measures than to wait for disaster to unfold," he said in a speech Thursday.

However, a New York Fed spokesperson tried to temper those expectations after Williams' speech, telling CNBC that his comments were part of an academic talk and "not about potential policy actions."

Italian Deputy Prime Minister Matteo Salvini said on Friday that he would meet coalition partner and leader of the 5-Star Movement Luigi Di Maio amid fears that a stand-off between the two parties might collapse the populist government.

Shares of Banco BPM, Ubi Banca and Unicredit all fell during afternoon trade.

Meanwhile, geopolitical tensions between the U.S. and Iran have given oil prices a boost. The U.S. said it had shot down an Iranian drone in the Strait of Hormuz, a key chokepoint for global crude flows. But Iran later denied the claims.

Elsewhere, investors looked for signs of progress in the U.S.-China trade dispute. U.S. and Chinese officials spoke over the phone Thursday, with Treasury Secretary Steven Mnuchin suggesting face-to-face talks could follow.

In terms of individual stocks, shares of Galapagos climbed 5.2% after KBC Securities raised its price target on the Amsterdam-listed stock. AB InBev shares climbed 5.3% after it announced the sale of its Australian unit to Asahi. Wirecard shares jumped 5% in afternoon trade after it announced a deal to handle card payments for supermarket chain Aldi.

At the other end of the European blue chip index, Publicis saw its shares fall 6.3% after the French advertising giant cut its revenue target following disappointing second-quarter results.

As for economic data, the European Central Bank said Friday that in the 12-month period to May, the euro zone's current-account surplus widened to 30 billion euros ($33.7 billion) from 22 billion in April.