UKX FTSE 100 Index

By Jon Sindreu 

European stocks edged higher Friday led by financial companies, ahead of earnings reports that are expected to shed light on the health of U.S. banks and the broader economy.

The Stoxx Europe 600 rose roughly 1.2% in morning trade. Gains were led by European banks, which rose 2%.

The biggest gainer was London-based Man Group PLC, the world's largest listed hedge-fund firm by assets. It was up 14% after it reported a powerful rise in funds under management and announced the purchase of real-estate investment manager Aalto Invest Holding AG.

In the U.S., futures markets pointed to a 0.2% opening gain for the S&P 500. J.P. Morgan Chase & Co., Citibank Inc. and Wells Fargo & Co. are all scheduled to report their third-quarter earnings later in the day, amid signs that the U.S. economy has been strengthening and the Federal Reserve is ready to increase borrowing costs in December--federal-funds futures now point at a 65% chance this will happen by then.

"I would like to see normalization sooner rather than later," Federal Reserve Bank of Philadelphia President Patrick Harker said Thursday.

Higher interest rates could be a threat for stocks unless the economic outlook improves, so a key factor for U.S. markets is whether this earnings season will rebound from five consecutive quarters of declines. So far, reports have been slightly disappointing for investors.

"It's early days so far," said Brad MacMillan, chief investor at Commonwealth Financial Network, who is optimistic stocks will be able to weather the transition towards higher rates.

"It's starting to look like we will indeed be able to make that handoff, " he added.

Investors will also be monitoring U.S. retail sales figures to gauge the strength of consumer spending, a key driver of economic growth.

Expectations of higher interest rates have pushed up the U.S. dollar, which has gained 1.7% against the euro and 1.1% against the yen over the last week.

A weaker yen was a boon for the Japanese Nikkei Stock Average, which was up almost 0.5% in the late afternoon. Asian stocks more broadly had a small rebound after a negative week, which had been driven by lackluster Chinese trade data.

Data released Friday, however, revealed that Chinese producer prices turned positive for the first time since 2012, an encouraging sign for markets. Hong Kong's Hang Seng Index gained 1%.

The People's Bank of China has pushed the yuan to its lowest level against the dollar since 2010, but investors appear much less concerned than they were about a sudden depreciation of the Chinese currency.

"It is remarkable how lightly markets have taken it considering how worried they were about it at the beginning of the year," said Valentijn van Nieuwenhuijzen, head of strategy at NN Investment Partners.

Thailand's SET index rose a powerful 4.2% after the death of King Bhumibol Adulyadej on Thursday. The monarch's health had prompted concerns of political instability, weighing on stocks earlier in the week.

In the U.K., the FTSE 100 was bolstered by the pound weakening 0.25% against the U.S. dollar, since foreign revenue generated by multinational companies listed on the British index should look beefier once it is translated into sterling.

The pound is down almost 2% since the start of the week and 18% below where it was when Britons voted to leave the European Union on June 23, as recent comments by U.K. officials have failed to reassure investors that the country's separation from the bloc won't have an impact on trade and migration.

"We don't see a rebound at all," said Stephen Gallo, European head of currency strategy at BMO Capital Markets. "What concerns us is that the brinkmanship tactics in both sides, the U.K. and the EU side, doesn't look like they are going to fade in the medium term."

The price of oil continued to rise on the back of expectations of the world's main producers keeping a tighter grip on supply. The Brent crude barrel traded at around $52.43 in early European trading.

Write to Jon Sindreu at jon.sindreu@wsj.com

(END) Dow Jones Newswires

October 14, 2016 05:37 ET (09:37 GMT)

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