Europe markets open: Stocks to rise, FTSE up 0.3%, despite a flatlining UK economy

A curious and perhaps fragile sense of optimism is gracing European markets at the open on Friday, with stocks poised to climb despite a fresh and worrying sign that the UK economy has stalled.

This strange divergence highlights a market that is looking past immediate domestic weakness and is instead singularly focused on the promise of an imminent interest rate cut from the US Federal Reserve.

Early indications point to a positive start across the continent. Futures tied to London’s FTSE 100, Germany’s DAX, and France’s CAC 40 are all pointing to gains of around 0.3 percent, setting the stage for a positive end to the week.

An economy at a standstill

This bullish open comes in the face of a stark economic reality check from the United Kingdom. Data released on Friday morning revealed that the UK economy recorded zero growth in the month of July, a sharp and painful deceleration from the 0.4 percent expansion seen in June.

This economic flatlining lands at a particularly sensitive moment, adding another layer of complexity for the Bank of England as it prepares to deliver its own monetary policy update next week.

The UK data follows Thursday’s highly anticipated decision from the European Central Bank, which opted to leave its key interest rate unchanged, a move that was widely expected but still serves as a reminder of the cautious mood among central bankers.

Corporate drama: a takeover battle, a ticket threat

Against this macroeconomic backdrop, two major corporate dramas are adding to the session’s intrigue. In Spain, a fierce banking battle is escalating, as the board of Sabadell has unanimously recommended that its shareholders reject a hostile takeover bid from its larger domestic rival, BBVA.

Meanwhile, in the travel sector, the famously pugnacious CEO of Ryanair, Michael O’Leary, has thrown down a new gauntlet.

He told the Financial Times that the budget airline is prepared to cut a further 1 million tickets to Spain, the latest salvo in an ongoing and bitter row over the country’s taxation policies.

The long shadow of the Fed

While these European stories are driving local sentiment, the market’s overarching narrative is still being written in Washington.

The entire financial world is now looking ahead to the US Federal Reserve’s policy meeting on September 16 and 17.

Following a crucial US inflation report on Thursday, money markets are now overwhelmingly pricing in a quarter-point rate cut from the Fed, a conviction that is providing a powerful, if temporary, tailwind for global equities.

The quiet optimism of this Friday morning is a direct reflection of that hope, but it will face its ultimate test when the central bankers convene next week.

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