Europe stocks close higher after U.S. debt ceiling deal; Swedish property group SBB soars 30%

This is CNBC's live blog covering European markets.

European stock markets closed higher Friday, after U.S. lawmakers passed a bill to raise the debt ceiling and cap government spending for two years, days before the default deadline.

The Stoxx 600 index ended up 1.5%, as it climbed further from the two-month low hit on Wednesday. Mining stocks led gains, up 4.2%, while autos rose 2.9%. Oil and gas stocks rose 2.3% ahead of the June 4 OPEC+ meeting.

European markets

The Fiscal Responsibility Act cleared a Senate vote late Thursday, after passing the House of Representatives on Wednesday.

The ongoing drama has only slightly rattled markets in recent weeks, and focus now returns to the outlook for the U.S. economy, recession risk, and whether the Federal Reserve will raise, hold or even look at beginning to cut interest rates.

Recent comments from officials have indicated the central bank may opt to skip another hike at its June meeting. However, the picture is complicated by continued strength in U.S. data., including in consumer spending and manufacturing orders. Friday will see the release of a closely-watched labor market report.

In Europe, a significant fall in euro zone inflation to its lowest level since Feb. 2022 on Thursday was not enough to comfort European Central Bank President Christine Lagarde, who said the 6.1% figure was still "too high" and that the hiking cycle needed to continue until it was clear inflation would come down to its 2% target in a "timely manner."

ECB officials have given firm hints it will raise rates again this month, but economists say the outlook for July and September is more uncertain.

Governing Council member Francois Villeroy de Galhau said Thursday further hikes would be "relatively marginal" and "most of the path is complete."

Asia-Pacific markets were mostly higher Friday, as consumer and real estate stocks powered Hong Kong's Hang Seng index as much as 4% higher. U.S. stocks rallied in response to a strong jobs report and the debt ceiling bill.

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U.S. stocks open higher

The three major U.S. indexes were trading higher as Friday's session kicked off.

The Dow added more than 200 points, up about 0.7%. The S&P 500 rose 0.8%, while the Nasdaq Composite gained 1%.

— Alex Harring

Stocks making gains: Dechra Pharma up 8%, Sectra up 7%

British veterinary drugmaker Dechra Pharmaceuticals saw shares up 8% on news of a deal with Swedish investment firm EQT. Dechra will be taken private by EQT for £4.88 billion ($6.16 billion), as reported by Reuters, and each shareholder will receive £38.75 in cash per share.

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Dechra Pharmaceuticals share price.

Sectra shares rose 8% after the company released positive results. The medical imaging IT and cybersecurity company's operating profit exceeded previous records, according to a press release, while recurring revenue increased.

The company also announced Thursday that it would be providing two Belgian hospitals with some of its cloud service technologies.

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Sectra share price.

— Hannah Ward-Glenton

Sweden's SBB soars on report of investor interest

Shares of SBB were up 27% at 10 a.m. London time after Bloomberg reported the troubled Swedish property group had attracted interest from investors including Brookfield Asset Management.

The company's share price has seen in steady decline to an all-time low over the past year and a half, as it battles with higher interest rates, housing market uncertainty and a large debt pile.

Last week it confirmed it was exploring strategic options including a "sale of the company, business segments, or specific assets."

Losses accelerated on Wednesday when holding company Ilija Batljan Invest AB said it would pause interest payments on its outstanding SBB hybrid bonds, following the suspension of SBB dividend payments. 

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Samhallsbyggnadsbolaget share price.

— Jenni Reid

French manufacturing ticks higher

Manufacturing activity in France rose 0.7% in April, following a 1.1% decline during the previous month, official statistics showed. Overall industrial activity was up by 0.8%

Output over the February-April period was also 1.6% higher than a year ago.

However, French statistics agency Insee said energy-intensive industries were still exposed to higher production costs.

The figures also showed the impact of French refinery strikes, which were at their most severe in March. April output of coke and refined petroleum added 23.6% after a 45.2% drop.

Separately, investors are waiting for an S&P announcement on France's credit rating on Friday, which could see it downgraded from an "AA" rating.

— Jenni Reid

Europe stocks open higher

European stock markets were upbeat early Friday, with the benchmark Stoxx 600 index up 0.4% at 8:30 a.m. London time.

Most sectors saw gains, with mining stocks up 1.7% and oil and gas 1% higher as healthcare dropped 0.4%.

France's CAC 40 rose 0.74% while Germany's DAX and the U.K.'s FTSE 100 were up 0.64% and 0.5%, respectively.

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Stoxx 600 index.

— Jenni Reid

European markets: Here are the opening calls

European markets are seen opening higher Friday, according to data from IG.

The U.K.'s FTSE 100 looks set to open 20.7 points higher at 7,518; Germany's DAX 91.5 points higher at 15,942; France's CAC 37.4 points higher at 7,169; and Italy's MIB up 115 points to 26,697.

— Jenni Reid

Senate passes bill to raise debt ceiling, preventing default

The Senate passed a bill Thursday night to raise the debt ceiling, sending it to President Joe Biden's desk.

He is expected to sign the legislation Friday, preventing what would have been the first-ever U.S. sovereign debt default.

The House-approved compromise bill passed the Senate by a 63-36 margin, garnering sufficient bipartisan support to overcome the chamber's 60-vote threshold to avoid a filibuster.

U.S. stock futures were slightly higher ahead of the vote and held at those levels after the bill was passed. Futures tied to the Dow Jones Industrial Average were up about 30 points.

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Friday jobs data will 'underline' Fed challenges, economist says

Data on nonfarm payrolls, the unemployment rate and hourly wages due Friday will highlight the challenges the Fed faces heading into the June policy meeting, according to Joe Davis, chief economist at Vanguard.

Economists polled by Dow Jones expected non-farm payrolls to rise by 190,000 in May, which would be a smaller monthly increase than the 253,000 added in April. They forecast an unemployment rate of 3.5%, slightly higher than the 3.4% seen in April.

Hourly wages are expected to grow 0.3% on a monthly basis and 4.4% compared with the same month a year ago. In April, wages rose 0.48% month over month and 4.45% on an annualized basis.

"We believe tomorrow's labor market report will underline the challenges the Fed continues to face in their push to drive inflation back towards target," Davis said. "We remain of the view that they should raise rates in June to enforce their resolve before pausing for some time to assess the impact on macro conditions, though the more important aspect of our perspectives remains the Fed being on hold through at least the end of the year."

"Indications of continued labor market tightness in tomorrow's report would provide further support for these views," he added.

— Alex Harring