European markets closed higher on Friday as investors continue to assess the trajectory of monetary policy after some tough statements from U.S. Federal Reserve officials.
The Stoxx 600 provisionally closed up 1.1%, paring losses from the last two sessions to end the week higher than it began.
Retail and auto stocks both added nearly 2% to lead gains as almost all sectors ended the session in positive territory.
Global markets took some heart from lower-than-expected consumer and wholesale inflation prints last week, prompting bets that the central bank would have to slow its aggressive interest rate hikes.
However, St. Louis Fed President James Bullard said Thursday that "the policy rate is not yet in a zone that may be considered sufficiently restrictive."
Bullard suggested that the terminal federal funds rate could reach the 5% to 7% range, higher than the market is currently pricing.
Global investors are closely tracking key economic data points for hints as to how central banks around the world will act as they look to rein in inflation.
The European blue chip index closed lower in the previous session amid the fallout from a missile hitting Polish territory. Meanwhile, the U.K. announced a new fiscal strategy centered on tax hikes and spending cuts as the government looks to plug a massive hole in its public finances.
Stocks on the move: Verbund up, Fuchs down
Stocks on the move: Verbund up 9%, Fuchs Petrolub down 4%
Austrian hydropower producer Verbund saw its shares climb more than 9% by mid-afternoon to lead the Stoxx 600 after the Austrian government announced plans for a temporary windfall tax of up to 40% for oil and gas firms and power companies. The tax can be cut to 33% if firms make green investments.
At the bottom of the index, shares of German lubricant maker Fuchs Petrolub fell 4%.
- Elliot Smith
The regulation pendulum is ‘about to swing too far’, Deutsche Bank CEO says
The CEO of Deutsche Bank told audiences at the European Banking Conference that he has concerns that the financial regulation "pendulum" is "about to swing too far."
Speaking in Frankfurt, Christian Sewing said banks would have made less progress in recent years without the regulations established after the financial crash, but that it was now time for regulators to consider where "it might have gone too far."
Sewing also said Europe could lose its position as a global leader in sustainable finance if regulation continues "as it has."
— Hannah Ward-Glenton
Commerzbank CEO Manfred Knof says the bank isn't preparing for disaster, but for mild recession
The CEO of Commerzbank Manfred Knof said the bank has prepared for a "mild recession" and he expects an uplift in nonperforming loans, but that it is "definitely not a disaster or a default issue."
"We have already made provisions but still at the moment we don't see a lot of issues ahead of us," Knof told CNBC's Annette Weisbach at the European Banking Congress in Frankfurt Friday.
Knof also said regulators, politicians and corporate banks have acted in a way that gives him "optimism" that the sector can manage the current economic climate.
— Hannah Ward-Glenton
UK retail sales partially rebound in October, but outlook remains bleak
U.K. retail sales rose by 0.6% month-on-month in October, surpassing expectations and partially recovering from a 1.5% drop in September.
The Office for National Statistics said retail sales volumes remained 0.6% lower than their pre-pandemic levels, while retail sales excluding fuel grew less than expected, highlighting consumer hesitance in the face of soaring inflation and a recession that is already underway, according to the Office for Budget Responsibility.
The OBR on Thursday projected that the U.K. will endure its sharpest fall in living standards on record over the next two years.
"With the festive season fast approaching, many people have already cut back on volume of in-store food purchases and will continue to revise food and clothing purchases as well as reining in their gift lists," said Farah Thalji, director at consultancy Simon-Kucher & Partners.
"Though we have seen a return to in-store shopping over the last several weeks, both in-store and online shopping outlets will be hard pressed to get consumers to part with their cash as discretionary income looks set to shrink even more."
- Elliot Smith
Stocks on the move: Verbund up 8%, Unibail-Rodamco-Westfield down 4%
Rate hikes have had ‘only limited effects’ on inflation so far, Fed's Bullard says
St. Louis Federal Reserve President James Bullard's language Thursday hurt sentiment among investors hoping to see the central bank pull back on interest rate hikes.
He said the Fed still has a work to do before inflation is under control while delivering remarks focused on the importance of using rules-based approaches when making policy. He is a voting member of the Federal Open Market Committee, which sets rates.
"Thus far, the change in the monetary policy stance appears to have had only limited effects on observed inflation, but market pricing suggests disinflation is expected in 2023," he said.
— Jeff Cox, Alex Harring
UK announces £55 billion in tax hikes and spending cuts as country set for largest fall in living standards on record
U.K. Finance Minister Jeremy Hunt on Thursday unveiled a sweeping £55 billion ($66 billion) fiscal tightening plan including a slew of tax rises and spending cuts as he attempted to plug a sizeable hole in the country's public finances.
The planned £30 billion in spending cuts and £25 billion in tax hikes come even as the independent Office for Budget Responsibility (OBR) confirmed that the U.K. economy is now in recession and set to contract by 1.4% next year.
The OBR also said the U.K. will suffer its largest fall in living standards since records began, erasing almost a decade of real household disposable income growth by 2024.
- Elliot Smith
Here are the opening calls
CNBC Pro: 'Bull case for semis is compelling': BofA picks top chip stocks to buy
Chip stocks, once a hot favorite among investors, are doing poorly this year.
But BofA says that despite consumer demand remaining under pressure, the "bull case for semis is also compelling."
Semiconductor sales could rebound in the second half of 2023, BofA predicted.
Here are some themes that chip stocks could ride on, says the bank, which also picks names to buy.
— Weizhen Tan
CNBC Pro: While Muddy Waters bets against dLocal, here are the other fintech stocks that short sellers are eyeing
At least 11 other US-listed financial technologies companies have more than one in ten shares betting on a decline in its price, according to data from S3 Partners.
— Ganesh Rao