European stocks closed higher on Friday, tracking the upswing for global equity markets after Fed Chair Jerome Powell signaled that the central bank is likely to cut rates in its upcoming meeting. The STOXX 50 added 0.5% to 5,492, the highest since February, and the STOXX 600 gained 0.5% to 562, less than two points away from its record high. The Fed Chair noted that risks to the labor market gained priority since the last meeting and likely warrant a 25bps cut next month, driving markets to pile on bonds and riskier assets. Heavyweight luxury conglomerates, which benefit from the outlook of looser financial conditions, rallied with LVMH, Hermes, and Kering adding between 2.5% and 1.5%. Auto producers and tech also gained, with Stellantis, Mercedes Benz, and ASML advancing close to 2% each. Meanwhile, revised data showed Germany’s economy contracted more sharply in Q2, dragged by a weaker manufacturing sector after US firms front-loaded purchases earlier in the year to beat tariffs.