European stocks wrap up week on a high note; focus shifts to Fed

By Shubham Batra

(Reuters) -European stocks rounded off the week on a positive note, supported by technology, real estate and mining shares, while investors shifted their focus to the U.S. Federal Reserve ahead of a long-awaited monetary easing at its meeting next week.

The pan-European STOXX 600 index was up 0.7% at 515.75 points on the day, while notching up gains of more than 1% for the week.

German shares outperformed European peers with a nearly 1% jump, boosted by a rise in shares of Siemens Energy and SAP.

France's CAC 40 rose 0.4% after consumer prices in the region's second-largest economy rose 2.2% year-on-year in August, in line with its preliminary reading.

Autos were the top gainers among sectors, jumping 1.6% to log their best day in over a month.

Technology and real estate gave the market its biggest boost, followed by miners that advanced 1.3%, as copper prices hit a two-week high on buying ahead of a Chinese holiday and amid stimulus hopes. [MET/L]

After the European Central Bank (ECB) lowered its deposit rate to 3.5% on Thursday, policymakers do not see an interest rate cut in October, barring a major deterioration in the outlook for growth, sources told Reuters.

Two of the ECB's policymakers -- Francois Villeroy de Galhau and Joachim Nagel -- expressed confidence on Friday about the prospect for lower inflation and interest rates in the euro zone.

Investors are now betting on the size and extent of the rate cut by the U.S. central bank next week, with money markets seeing a nearly 40% chance for a 50-bp reduction on Sept. 18.

"We're still expecting the Fed to cut by 25 basis points. But we're so far from neutral right now that a 50 basis point cut should not be seen as a sign of danger on the horizon. So in that sense, it's entirely possible that they will make a more sizable cut next week," said Gene Salerno, chief investment officer at SG Kleinwort Hambros.

Former chief of the New York Fed Bill Dudley said he thought there was a strong case for a 50-bp cut.

Among other movers, heavyweight AstraZeneca fell after Deutsche Bank cut the stock's rating to "sell" and lowered its price target on Friday.

Worldline shares dropped 14.4% to an record low, after another profit warning and announcement of the departure of its CEO.

(Reporting by Shubham Batra in Bengaluru; Editing by Sherry Jacob-Phillips, Mrigank Dhaniwala and Jane Merriman)