Fed’s Inflation Speech by Fed Moving Equities

European stocks fell on Friday morning as investors defended a major policy change by the US Federal Reserve and news that Japanese Prime Minister Shinzo Abe is resigning due to health concerns.

The pan-European Stoxx 600 dropped 0.17% mid-morning, with most sectors trading in the red. However, bank shares rose by more than 2%. The reaction comes after U.S. stocks gained momentum on Thursday following remarks by Fed Chairman Jerome Powell. He revealed a major policy change, which suggests that interest rates are likely to remain low for some time.

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 changing its rates.

Meanwhile, Japanese Prime Minister Shinzo Abe announced his resignation for health reasons. “I had to fight the disease and be treated and I was not really in a perfect condition in terms of health care,” Abe said Friday, according to a translation. “I want to send my apologies to the people of Japan,” he added.

The dismissal sent Japanese stocks lower.

Retail sales,

Economic data were also in focus Friday. The GDP of the second quarter of France (gross domestic product) was confirmed at -13.8%. Meanwhile, the French statistical office, Insee, reports that household consumption increased by 0.5% in July from the previous month.

In Spain, retail sales fell 3.9% year-on-year in July, a slight improvement from the previous reading.

On the business front, the polluted Italian lender Monte dei Paschi received a green light from the European Central Bank to draw up its plan to clean up bad loans, Reuters reported. Their shares rose above 3% in early European trade.

Rolls-Royce, the engine manufacturer, said it would sell assets in an attempt to raise £ 2bn. Shares fell about 2%.

In other business news, Norwegian Air said Friday that it needs more cash to meet all of its 2021 commitments, Reuters reported. The stock traded lower on the news.

Christine Wang contributed to this report.