Ever wake up, check the futures, and suddenly feel that little spark of optimism? That’s exactly what’s happening across Europe this morning. Screens are glowing green before the opening bell, and for once it feels like the good vibes might actually stick around for more than a couple of hours.
Traders have one eye on Washington and another on Westminster today, and somehow both stories are pointing in the same direction: lower borrowing costs ahead. Funny how markets work sometimes.
A Perfect Storm of Rate-Cut Fever
Let’s be honest – we’ve been talking about Federal Reserve cuts for months. But something shifted last week. The probability of a December move jumped to nearly 85% almost overnight, and European indices are loving it.
Pre-market indications this morning are deliciously bullish. According to early data, we’re looking at the German DAX opening around seven tenths higher, France’s CAC 40 not far behind, and even the usually cautious FTSE 100 getting in on the action with a quarter-point gain. Italy’s FTSE MIB rounds out the pack with similar strength.
In my experience, when the Stoxx 600 futures are up this convincingly before sunrise, the actual cash open rarely disappoints. Call it market psychology or just momentum – either way, the path of least resistance today is clearly higher.
Why the Fed Suddenly Looks Dovish Again
It’s not just wishful thinking. Senior Fed officials have been dropping hints left and right. One New York Fed president basically said last Friday that rates can come down “in the near term.” When someone that high up speaks that plainly, traders listen.
Add to that the growing chatter about who might replace the current chair – apparently interviews are already happening – and suddenly the conversation has shifted from “if” to “how much” and “how soon.”
There’s a very good chance we’ll have clarity on Fed leadership before Christmas.
– Senior U.S. Treasury official, speaking yesterday
Markets hate uncertainty. The prospect of a more predictable, possibly more accommodative central bank is acting like rocket fuel right now.
The Kevin Hassett Factor Nobody Saw Coming
Here’s the part that genuinely surprised me. Names have been floating around for months, but suddenly one candidate has surged to the front of the pack – someone widely regarded as friendly to lower rates and lighter regulation.
I won’t pretend to know how these appointments actually work behind closed doors, but the market’s reaction speaks volumes. Risk assets love the idea of a Fed that’s less worried about inflation overshoots and more focused on supporting growth.
Whether that’s ultimately good policy is a debate for another day. What matters this morning is that European equities are pricing in a friendlier global rate environment, and they’re doing it with enthusiasm.
Meanwhile in London: Budget Day Jitters
Of course, not everything is coming up roses. While the continent celebrates the prospect of cheaper money, UK investors have to contend with today’s Autumn Budget statement.
The Chancellor faces an unenviable task: plug a significant fiscal hole while sticking to self-imposed borrowing rules. Most analysts expect a combination of tax increases and spending restraint – never a crowd-pleaser in financial markets.
- Potential rise in employer National Insurance contributions
- Changes to capital gains tax alignment
- Possible adjustments to inheritance tax reliefs
- Extension of the windfall tax on energy companies
- Reforms to non-dom taxation regime
Any one of these could dent sentiment toward UK-listed companies, particularly in sectors like housebuilding, retail, and financials. Yet strangely, the FTSE futures are still pointing higher this morning.
Perhaps investors have already priced in the worst. Or maybe the global rate-cut narrative is simply too powerful to be derailed by domestic fiscal tightening. We’ll know more by lunchtime.
Sector Winners and Losers in Today’s Environment
Some clear patterns are emerging as we approach the open.
Rate-sensitive sectors are leading the charge – think real estate, utilities, and consumer staples. Lower borrowing costs mean higher present values for future cash flows, and markets waste no time reflecting that.
Banks present a more mixed picture. European lenders typically benefit from steeper yield curves, but if everyone believes rates are heading significantly lower, the initial pop might be modest.
Technology and growth stocks? They’re quietly having a very good morning. When money gets cheaper, the penalty for holding long-duration assets shrinks dramatically.
| Sector | Expected Performance | Key Driver |
| Real Estate | Strong outperformance | Lower discount rates |
| Technology | Leading gains | Duration trade |
| Utilities | Solid advance | Defensive + yield appeal |
| Banks | Mixed/modest | Flattening curve concerns |
| Energy | Lagging | UK windfall tax risk |
What Happens After the Open?
That’s the million-dollar question. Early strength is nice, but sustainability matters more.
If the UK Budget delivers fewer nasty surprises than feared – or if the Chancellor manages to sound optimistic about growth despite the medicine – we could see the rally extend into the afternoon.
Conversely, any significant negative reaction from British assets might create some two-speed behavior within European indices. The DAX and CAC could keep climbing while the FTSE lags or even turns red.
My gut feeling? The broader global narrative wins today. When the world’s most important central bank is perceived to be in easing mode, local fiscal dramas tend to take a backseat.
The Bigger Picture for European Equities
Step back for a moment and the setup actually looks quite constructive.
Valuations remain reasonable compared to the U.S., earnings growth forecasts for 2026 are being upgraded, not downgraded, and now monetary policy appears to be turning supportive again.
Throw in a weaker euro – which helps the many multinational companies listed in Europe – and you have a recipe for something more than just a short-term bounce.
I’m not saying we’re off to the races forever. Geopolitical risks haven’t disappeared, and inflation could always rear its head again. But right now, in late November 2025, the stars seem to be aligning rather nicely for European stocks.
Sometimes markets give you these windows where everything clicks. Today feels like one of those days.
So grab your coffee, watch the UK Budget statement at 12:30 London time, and enjoy the ride while it lasts. Because in this business, the good days don’t come around every morning.
Disclosure: The author holds long positions in European equities but may trade in and out of these positions without notice.
