By European stock markets began Friday’s session with a mixed and somewhat hesitant performance, as a sharp drop in shares of German reinsurer Munich Re tempered a broader, albeit marginal, move higher.
Investors are also closely watching the evolving debate around the Bank of England’s future interest rate path, with analysts offering sharply conflicting views.
About 30 minutes into the final trading session of the week, the pan–European Stoxx 600 was last seen trading approximately 0.1% higher, indicating a very slight positive bias.
London’s FTSE 100 and the French CAC 40 were up 0.1% and 0.3%, respectively, while Germany’s DAX was trading 0.2% lower, partly dragged down by the news from Munich Re.
The major corporate story of the morning is the significant 7.3% drop in the shares of German reinsurer Munich Re.
The decline came after the company trimmed its insurance revenue forecast for 2025, citing currency headwinds and recent business developments. This guidance cut overshadowed the fact that the group’s second-quarter net profit actually came in above expectations.
The sharp negative reaction to the lowered forecast highlights the market’s sensitivity to any signs of weakening corporate outlooks.
This mixed open follows a session on Thursday where European shares had ended higher, boosted by confirmation from Moscow that Russian President Vladimir Putin was scheduled to meet with his US counterpart, Donald Trump, within days.
Overnight in Asia, stocks were also mixed, though Japanese stocks had surged after investment giant SoftBank hit a record high following a quarterly earnings beat.
The Bank of England conundrum: to cut or not to cut?
A key point of discussion for UK-focused investors is the future trajectory of the Bank of England’s monetary policy. Currently, markets are pricing in a more than 90% probability that the central bank will keep its interest rates on hold at its next meeting.
However, there is a significant divergence of opinion among economists on what comes next.
Capital Economics, for instance, expects the central bank to continue cutting rates at every meeting until it reaches a 3% base rate next year.
They disagree with the Bank’s own inflation forecasts and argue that “it’s only a matter of time” before the current weakness in the labor market leads to a cooling in wage growth and brings inflation back down toward the Bank’s target.
Despite this dovish long-term view, the firm says it’s “less confident that the next cut will come in November after the Bank’s change in tone.”
Economists at Santander UK are firmly in the opposite camp. The lender cites “ugly inflation optics” and the potential impact of Chancellor Rachel Reeves’ upcoming budget as key reasons why it does not foresee another rate cut before the end of the year.
Barclays, meanwhile, has a November cut as its base case, but flags the risk that potential budget measures from Chancellor Reeves could drag on GDP growth and pull inflation even lower, which would support the case for easing.
This wide range of views underscores the deep uncertainty surrounding the UK’s economic and policy outlook.
US markets provide a stable backdrop
Futures tied to Wall Street indexes moved slightly higher on Friday morning, following a session on Thursday where the Dow Jones Industrial Average had closed lower.
The overall stability in US futures suggests a relatively calm external environment for European markets as they navigate their own set of corporate and economic developments.
The post Europe markets open: Stoxx 600 up 0.1%, DAX dips 0.2% as Munich Re shares fall 7% appeared first on Invezz
