European stocks hit record highs as BP surges & UK GDP data looms

European indices hit fresh record highs ahead of UK GDP reading

European equity indices closed at fresh record highs overnight, driven by a 7.3% gain in BP shares after activist investor Elliott Management was reported to have acquired a stake in the company.

The rally in the FTSE 100 was also aided by last week’s 25 basis point (bp) interest rate cut to 4.50% from the Bank of England (BoE), which resulted in a surprise 7–2 split. The two dissenters called for a larger 50 bp rate cut, which has increased the probability to almost 100% for a 25 bp rate cut in May.

Counterbalancing the dovish vote, the Bank of England slashed its growth forecast for 2025 to 0.75%, down from 1.5% three months earlier. It also projected consumer price index (CPI) inflation to rise to 3.7% in Q3. This combination of factors has raised concerns that the UK economy is potentially veering towards stagflation.

Attention now turns to this week’s UK Q4 GDP figures, previewed below, which are expected to be subdued yet may show some subtle signs of improvement.

UK Q4 GDP

Date: Thursday, 13 February at 6:00pm AEDT

In November, the UK economy grew by 0.1% month-on-month (MoM), showing some improvement from the 0.1% contraction in both September and October, although it fell short of the 0.2% consensus estimate. For December, the market is looking for a modest gain of 0.1% MoM.

For the Q4 2024 reading, the market is looking for growth to expand by 1% year-on-year (YoY), which, although tepid, would be the highest rate of growth since the last quarter of 2022.

UK GDP annual growth rate

FTSE 100 technical analysis

After a robust rally to the mid-May high of 8474, the FTSE 100 then spent six months consolidating gains within a bullish trend channel before finally breaking higher in mid-January.

The move was in line with our call back in mid-December, in which we said:

“A sustained break above the trend line resistance at 8370–8390, which comes from the highs of May, August, and October, and then above a band of horizontal resistance at 8400–8420, is needed to confirm that the correction in the FTSE 100 is complete, and that the uptrend has resumed towards 8,600.”

With our expectation of a push towards 8600 met and exceeded, we currently hold a neutral bias towards the FTSE 100 and may look to rebuy a pullback to support at 8400–8380, pending signs of basing.

FTSE 100 daily chart

DAX 40 technical analysis

The rally in the DAX 40 found another gear last month, boosted by prospects of an end to the war in Ukraine and signs of improvement in forward-looking growth indicators, taking the DAX well into overbought territory.

While we think the backdrop remains positive, we would not be chasing the DAX at these levels. Instead, we would prefer to wait for a corrective pullback in the weeks ahead, with a view to being a buyer pending signs of basing.

DAX daily chart

• _{Source: TradingView. The figures stated are as of 11 February 2025. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}