European stock markets closed higher on Friday, as investors continued to assess the full scope of the European Union's trade deal with America and hopes rose for a U.S. interest rate cut in September.

The pan-European Stoxx 600 provisionally closed 0.47% higher, with top sectors including mining, autos and travel.

London's FTSE 100 closed at a record high for the fourth session in a row, adding another 0.13% on Friday to clinch its best weekly performance since May. U.K. stocks have found support this week from gains in mining, retail and defensive stocks, along with Purchasing Managers' Index data on Thursday showing the strongest business activity for a year.

U.S. markets were also buoyant on Friday after Federal Reserve Chair Jerome Powell suggested interest rate cuts could lie ahead, during a closely-watched speech at the central bank's symposium in Jackson Hole.

Powell said "the shifting balance of risks may warrant adjusting our policy stance," which has kept rates on hold since December 2024. However, he also noted that tariffs are causing risks to the inflation outlook.

The dollar slid following the remarks, sending the British pound and euro 1% and 0.8% higher, respectively, against the greenback.

Economists at Deutsche Bank said in a Friday note that the speech was more dovish than expected and that following Powell's signals, they now expect a quarter-point rate cut in September with follow-ups in December and March

Source: CNBC