EUROPE MARKETS: European Stocks Head For 1.6% Weekly Rise As Investors Shake Off North Korea Jitters

Pound rallies to highest since July 2016

European stocks posted small losses on Friday, but headed for solid weekly gains, as investors digested the latest provocation from North Korea and a shift in rhetoric at the Bank of England.

The Stoxx Europe 600 index traded 0.1% lower at 381.51, after closing at its highest level since Aug. 8 on Thursday.

For the week, the pan-European benchmark was headed for a 1.6% advance, following a rally at the beginning of the week after geopolitical jitters receded and the damage from Hurricane Irma was seen as less severe than expected.

However, on Friday, concerns over North Korea resurfaced again after the isolated nation fired a missile across northern Japan for the second time in a month. The launch came just a day after Pyongyang said it wanted to sink Japan with a nuclear weapon (http://www.marketwatch.com/story/north-korea-threatens-to-reduce-the-us-to-ashes-and-darkness-2017-09-14) and pledged to reduce the U.S. to "ashes and darkness."

"The market response has been thus far rather muted. Either because we've got used to the threats, expected it after recent sanctions led to more aggressive rhetoric, or because Pyongyang kept it local (another intermediate range rather than intercontinental), annoying Japan but not quite goading the West," said analysts at Accendo Markets in a note.

U.S. stock futures initially fell after the missile launch, but bounced back to trade around the flatline (http://www.marketwatch.com/story/dow-futures-steady-paring-losses-that-came-after-latest-north-korean-missile-2017-09-15).

Pound's BOE bounce: Sterling jumped to $1.3446, trading around its highest level since July 2016, shortly after the U.K.'s Brexit vote. The pound bought $1.3398 late Thursday in New York and $1.3210 on Wednesday.

Sterling's gains in recent days come after the Bank of England signaled it is preparing to raise interest rates (http://www.marketwatch.com/story/boe-says-it-may-hike-interest-rates-within-months-2017-09-14) for the first time in over a decade in the coming months to keep inflation under control.

U.K. inflation jumped (http://www.marketwatch.com/story/uk-inflation-picks-up-pace-testing-boe-patience-2017-09-12) to 2.9% in August, exceeding the BOE's 2% target, largely due to a weak pound.

The strong pound rally on Friday weighed on the U.K.'s FTSE 100 index , which dropped 0.4% to 7,264.60. The London benchmark is now on track for a 1.5% weekly drop, the biggest since the week ending Aug. 11, according to FactSet.

Other indexes: Germany's DAX 30 index was marginally lower at 12,536.68, while France's CAC 40 index was slightly higher at 5,225.70.

The euro rose to $1.1925, up from $1.1920 late Thursday in New York.

Stock movers: Shares of H&M Hennes & Mauritz AB (HM-B.SK) climbed 2.5% after the Swedish fashion retailer said fiscal third-quarter sales rose 5%, boosted by a "significantly larger summer sale this year."

ABN AMRO Group NV (ABN.AE) lost 0.7% after the Dutch government reduced its stake in the bank to 56% from 63% (http://www.marketwatch.com/story/dutch-government-cuts-its-abn-amro-stake-2017-09-15). The Dutch government nationalized ABN AMRO in 2008 in the wake of the global financial crisis.

Shares of J.D. Wetherspoon PLC (JDW.LN) rose 9.3% after the U.K. pub operator reported a rise in profit (http://www.marketwatch.com/story/wetherspoon-profit-rises-maintains-dividend-2017-09-15) and maintained its full-year dividend.

(END) Dow Jones Newswires

September 15, 2017 05:04 ET (09:04 GMT)