European shares traded higher on Friday as cautious optimism returns to markets over the state of U.S.-China trade relations, though gains may remain capped by escalating political uncertainty in the United States.
The pan-European Stoxx 600 rose by 0.5% midway through the session, with basic resources adding 1.7% to lead gains as the majority of sectors traded in positive territory, while utilities slipped 0.5%.
Britain’s FTSE 100 led the upward momentum, adding more than 1% to hit its highest since August 2 as sterling fell after Bank of England Monetary Policy Committee (MPC) member Michael Saunders said it is “quite plausible” that the central bank’s next move is a rate cut.
The index tends to move inversely to GBP on account of the proportion of FTSE 100 companies’ profits denominated in dollars. Sterling pared its initial losses by the midpoint in the session to trade down 0.15% at $1.2303.
Investor focus is largely attuned to political developments in the U.S., following the release of a whistleblower complaint against President Donald Trump.
The report, published on Thursday, claimed the U.S. leader abused his office by enlisting the support of Ukraine to interfere in the 2020 U.S. election and that his administration tried to “lock down” records of a conversation between Trump and Ukrainian President VolodymyrZelensky.
It sets the stage for an impeachment inquiry into the president that was announced by U.S. House of Representatives Speaker Nancy Pelosi earlier in the week.
On the U.S.-China trade front, negotiators on both sides are set to meet in Washington, D.C., on Oct. 10, three people close to the talks told CNBC on Thursday.
In Asia, stocks were mostly lower as fresh data showed China’s industrial profits for August fell 2% from a year earlier. MSCI’s broadest index of Asian shares excluding Japan dropped around 0.3%.
Back in Europe, political developments closer to home also weighed on investors’ minds. European Commission President Jean-Claude Juncker told a German newspaper Friday that Britain would be responsible if a Brexit deal is not found.
U.K. Prime Minister Boris Johnson on Thursday said that tempers needed to be calmed down following furious scenes in Parliament the previous day. His ruling Conservative Party is set to kick off its annual conference in Manchester next week.
Elsewhere, investors will look out for euro zone economic sentiment figures due to be released later in the morning.
In terms of individual stocks, U.K. home builder Persimmon climbed 4% after Jefferies upgraded the stock to “buy” from “hold” on the assertion that Brexit risks to the business have been overplayed.