Europe midday: Stocks extend gains ahead of Jackson Hole

European stocks had extended gains by midday on Friday as investors eyed a speech by Federal Reserve chair Jerome Powell for further clues on the timing of rate cuts.

The benchmark Stoxx 600 index was up 0.3%, Germany’s DAX was 0.7% higher and France’s CAC 40 was up 0.6%.

Joshua Mahony, chief market analyst at Scope Markets, said: "Looking ahead, markets will undoubtedly look towards Jerome Powell’s Jackson Hole Testimony as the central factor driving market sentiment as we head into the weekend. Jackson Hole has long been utilized as a key platform for major monetary policy announcements, with the likes of Volcker, Greenspan, Bernanke, Draghi, and Jerome Powell all having made substantial declarations at this meeting in the past.

"This time we are expecting to see Powell lay the ground for a likely rate cut in less than a month’s time. With core PCE inflation back down to 2.6%, and the jobs market continuing to throw out warning signs, the dual mandate of the Federal Reserve provides the basis for easing that should help drive further equity gains and a weaker dollar."

In corporate news, Nestle slumped as it announced the departure of chief executive Mark Schneider, who will be replaced by Laurent Freixe.

Dan Coatsworth, investment analyst at AJ Bell, said: "It’s not a huge surprise to see Schneider head out the door given the company’s uneven performance in recent times. Schneider’s strategy of focusing on core areas like pet food, coffee and nutritional products had largely been successful during the first part of his tenure but over the last year the situation has deteriorated - partly thanks to an uncertain backdrop but also as a result of problems of Nestlé’s own making.

"The botched integration of a new IT system was never going to reflect well on Schneider and the company also faces a probe by the French authorities over the potential use of illegal purification methods on bottled mineral water.

"The immediate share price reaction might suggest the market would have preferred an outsider to come in and shake up Nestlé rather than someone who has held senior positions at the company for years.

"Freixe will face the same challenges as his predecessor and counterparts at rival consumer goods firms - how to persuade shoppers, particularly in the West, back to premium brands after a period when households have been tightening their belts and trading down to cheaper alternatives."

Elsewhere, Direct Line fell after saying it had made a miscalculation in its 2023 Solvency II own funds. It said the solvency capital ratio at the end of 2023 was 188%, down from 197% but still above its risk appetite range of 140% to 180%.

Melrose Industries was knocked lower by a downgrade to ‘sell’ from ‘buy’ at UBS.