European equities move lower following Fed policy shift; Japan's Abe reportedly set to resign
- U.S. Federal Reserve Chairman Jerome Powell unveiled a major policy change Thursday, which suggested that interest rates are likely to remain low for some time. Generally, news of low rates is positive for stocks.
- In other news affecting global markets, Japanese Prime Minister Shinzo Abe is reportedly set to resign.
European stocks fell in early trade Friday as investors digested a major policy shift by the U.S. Federal Reserve and reports that Japanese Prime Minister Shinzo Abe is set to resign.
The pan-European Stoxx 600 dropped 0.48%, with most sectors trading in the red.
The reaction in Europe comes after U.S. equities got a boost on Thursday following comments from Fed Chairman Jerome Powell. He unveiled a major policy change, which suggests that interest rates are likely to remain low for some time. Generally, news of low rates is positive for stocks.
Powell said the Fed will allow inflation and employment to run above target levels to support the economy. In practice, this means that the Fed will allow inflation to run above 2% before it changes its rates.
Meanwhile, Japanese media reported Friday that Prime Minister Shinzo Abe intends to resign for health reasons. Abe plans to step down to deal with a health problem, national broadcaster NHK reported citing sources close to the prime minister.
Economic data was also in focus Friday. France's second-quarter GDP (gross domestic product) was confirmed at -13.8%. Meanwhile, France's statistical office, Insee, reported that household consumption rose 0.5% in July from the previous month.
In Spain, retail sales dropped 3.9% year-on-year in the month of July, a slight improvement from the previous reading.
On the corporate front, the embattled Italian lender Monte dei Paschi received a green light from the European Central Bank to set up its plan to clean up bad loans, Reuters reported. Its shares rose above 3% in early European trade.
Rolls-Royce, the engine maker, said it would sell assets in an attempt to raise £2 billion. Shares fell about 4% in early trade.
Christine Wang contributed to this report.
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