UPDATE 2-Political turmoil in Italy weighs on European stocks

* Italian stocks hit two-week lows on political woes
* Publicis sinks on downbeat FY revenue forecast
* STOXX up 0.1% for week, buoyed by rate cut hopes

(Updates to close)
By Sruthi Shankar and Amy Caren Daniel
July 19 (Reuters) - European shares ended only marginally
higher on Friday as worries about the stability of Italy's
government dented optimism from renewed signals the U.S. Federal
Reserve will cut interest rates soon.
The pan-European STOXX 600 .STOXX closed up 0.12% after
rising as much as 0.7% in morning trade, with Italy's blue-chip
stocks .FTMIB falling 2% to two-week lows.
Milan-listed banks .FTIT8300 were the hardest hit on
worries the year-old coalition government might collapse after
sparring between the two main political parties and that a new
election could take place too late for a new administration to
approve a 2020 budget. Government ministers are due to meet later on Friday.
"The uncertainty surrounding the political situation in
Italy remains relatively high, especially with discussions about
the budget coming in later in the year," said Bert Colijn, a
senior economist at ING. "It is translating into risk for the
moment."
Aiding a strong start for Europe were comments overnight
from New York Fed President John Williams who said policymakers
could not wait for economic disaster to hit before adding
stimulus, reviving expectations of a deeper-than-expected rate
cut in July and sparking a rally in shares worldwide.
Markets have fully priced in a 25 basis point cut by the Fed
at a policy meeting next week and expect the European Central
Bank to hint at a similar move amid signs global growth is
slowing.
Banks .SX7P , which tend underperform in a falling interest
rate environment, fell about 0.8%, the worst performing sector
on the STOXX 600.
Poor earnings over the last two sessions had threatened to
take the index lower on the week, but Friday's gains helped the
STOXX end the week higher for the sixth time in seven weeks.
Trade-sensitive stocks of technology companies and
automakers got a lift after U.S. Treasury Secretary Steven
Mnuchin suggested in-person talks between U.S. and Chinese
officials could follow after telephone conversations on
Thursday. Industrial stocks .SXNP were the top gainers as shares in
German payments company Wirecard WDIG.DE jumped 5.5% after it
signed an agreement with supermarket chains ALDI Nord and ALDI
Sued to process card payments. Sweden's Volvo VOLVb.ST rose 5.5%, recovering from a
slide on Thursday after the auto and truck maker announced cost
cutting measures to counter the impact of tariffs.
Belgium-based Budweiser owner Anheuser-Busch InBev ABI.BR
also jumped 5.5%, keeping the euro zone's blue-chip index
STOXX50E afloat, after the debt-heavy brewer said it would
sell its Australian operations to Japan's Asahi 2502.T and was
still interested in reviving the stalled flotation of its Asian
business.
Media shares .SXMP were a weak spot, sliding half a
percent on Publicis' PUBP.PA 6% drop after the advertising
group cut its 2019 revenue growth guidance.