European stock markets saw an uptick on Friday, buoyed by stronger-than-expected UK growth figures and growing optimism that the U.S. Federal Reserve may implement rate cuts.
Germany’s DAX index rose by 0.4%, France’s CAC 40 increased by 0.5%, and the UK’s FTSE 100 also climbed by 0.4%.
UK economy exits recession, spurring investor confidence
Adding to the positive market sentiment, the UK announced that its economy grew by 0.6% in the first quarter of 2024, surpassing the anticipated 0.4% and effectively pulling out of a recession that began in the latter half of the previous year.
Additionally, March saw a monthly growth rate of 0.4%, outpacing expectations of 0.1%.
Bank of England and ECB monetary policies under scrutiny
Despite the Bank of England maintaining interest rates at a 16-year high on Thursday, the decision included a split vote, with two out of nine members opting for a rate cut.
This has fueled speculations of a potential rate reduction in the upcoming months, with money market traders estimating a 45% chance of a cut at the next policy meeting.
Furthermore, about 58 basis points of easing are expected by year-end.
Investors are also keenly awaiting the European Central Bank’s latest monetary policy meeting account, which is anticipated to provide further insights into future rate cuts, especially after indications of a likely reduction in June.
Corporate sector shows robust growth, led by IAG and Mediobanca
In the corporate arena, shares of IAG surged 2% after the airline group reported a first-quarter operating profit of €68 million, a significant increase from €9 million in the same period last year.
IAG, the parent company of British Airways (LON:ICAG), Iberia, and Aer Lingus, also reported a sharp rise in revenue, positioning itself strongly for the upcoming peak summer travel season.
Similarly, Mediobanca’s shares climbed 3% following the announcement of a 42% increase in net profit for the January-March quarter on an annual basis, with plans to distribute an interim dividend of €421 million this month.