Stoxx 600, FTSE 100, gold tariff, Bank of England

European stock markets rose sharply after news emerged that U.S. and Russian officials are working on a deal to stop the war in Ukraine.

Bloomberg, citing sources familiar, reported that a potential agreement would allow Russia to occupy the territory it took during its invasion of Ukraine.

The Stoxx Europe 600 index ended the day up 0.3% and France’s CAC 40 rose 0.4%.

Germany’s DAX and the U.K.’s FTSE 100 provisionally closed flat, pulled down by declines in defense stocks.

— Ganesh Rao

Shares of European defense contractors slipped into the red after news emerged that U.S. and Russian officials are working on a deal to stop the war in Ukraine.

Bloomberg, citing sources familiar, reported that a potential agreement would allow Russia to occupy the territory it took during its invasion of Ukraine.

Shares of Germany’s Rheinmetall were trading lower by 1.2%, Hensoldt declined by 6.4% and Renk fell 5% at 4 p.m. in London.

London-listed BAE Systems and Babcock also gave up gains from earlier in the day. Italy’s Leonardo and France’s Thales were also down by 3.9% and 0.8% respectively.

The companies are expected to benefit from renewed spending in Europe’s defense rearmament.

— Ganesh Rao

Deutsche Telekom CEO Tim Höttges has told CNBC he sees a more competitive environment in Germany, but that the country still has huge bureaucracy.

His comments came after Deutsche Telekom raised its core profit guidance for 2025 on Thursday, but flagged weak demand in its home market.

Hottges told CNBC the company is looking to defend its position in a price war, saying “we are defending our positions in areas where we are highly attacked with lower prices.” He also called for greater support from the government to build out the network more cheaply and quickly, claiming that “the approvals are still very complicated”. 

— Abby Ryanto

Bank of England Governor Andrew Bailey told CNBC on Thursday that the path for U.K. interest rates is still downward, but policymakers are facing a more “finely balanced situation” as inflation, a weaker labor market and U.S. tariffs create uncertainty.

The Bank of England’s Monetary Policy Committee cut its key interest rate by 25 basis points on Thursday, reducing rates to 4%.

The MPC was divided in its vote, with the cut being passed on a 5 to 4 split between members.

In an interview with CNBC’s Ritika Gupta, Bailey said the division between committee members reflected “what a finely balanced situation we’re currently in,” but insisted he still believed “the path will be further downwards.”

“But I think we’ve got more uncertainty about the precise … course of that path,” he said. “So I think there is more uncertainty about exactly what we’ll be doing at the meetings immediately to come.”

Bailey said there are lingering risks around inflation, which hit a hotter-than-expected 3.6% in June, and noted that the U.K. labor market was showing signs of weakening.

He added that the MPC was monitoring new U.S. tariffs being imposed by the Trump administration, although he stressed that domestic considerations were having a bigger impact on its decisions right now.

“The world is still in an uncertain place, and we have to factor that in, and I would also say that … yes, there’s a whole series of sort of settlements on tariffs going on, but of course, it is leaving overall tariff levels and [the] overall impact on trade at a larger level than it has been for a very long time,” he told CNBC.

“I think we have to bear that in mind as well … we spend a lot of time looking at the world, because the U.K. is a very open economy.”

— Chloe Taylor

Munich Re shares have tumbled toward the bottom of the Stoxx 600 this morning, after the reinsurer cut its revenue guidance for the year.

The company’s chief financial officer, Christoph Jurecka, told CNBC’s “Squawk Box Europe” that the tariff environment is not affecting its commitment to the U.S., and warned of an upward trend in large losses from natural disasters. 

— David Martin

We’re around 30 minutes into Friday’s trading session, and stocks are broadly marginally higher.

The pan-European Stoxx 600 was last seen trading around 0.1% higher. London’s FTSE 100 and the French CAC 40 are up 0.1% and 0.3%, respectively, while Germany’s DAX is down by 0.2%.

Shares of German reinsurer Munich Re are down 7.3% after the company trimmed its insurance revenue forecast, citing currency headwinds and business developments.

Markets are now pricing in a more-than 90% probability the Bank of England keeps rates where they are at its next meeting.

Some analysts disagree. Capital Economics says it expects the central bank to keep cutting at every meeting until it reaches a 3% base rate next year because it disagrees with its inflation forecasts, and says “it’s only a matter of time” before labor market weakness leads to wage growth and inflation coming back down toward the Bank’s target.

But 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, with the lender citing “ugly inflation optics” and Chancellor Rachel Reeves’ upcoming budget as reasons it doesn’t see another cut before the end of the year.

Meanwhile, Barclays has a November cut as its base case, flagging the risk of Reeves’ potential budget measures dragging on GDP growth and pulling inflation lower.

— Jordan Butt

Shares of Munich Re are lower in pre-market trade, after the reinsurer lowered its insurance revenue forecast for 2025. The group cited foreign exchange and business developments, but second-quarter net profit still came in above expectations. 

— Michael Considine

The U.K. government is loathe to admit it, but economists say it’s highly likely that the Treasury will have to hike taxes in the fall if it is to bung a black hole in the public finances that it has effectively created for itself.

The National Institute of Economic and Social Research (NIESR) is the latest economic think tank to warn that taxes would have to rise later this year if British Chancellor Rachel Reeves is to meet her self-imposed “fiscal rules.”

Read more from CNBC’s Holly Ellyatt here.

Hello from London.

Regional indexes look set for a muted open this morning, with futures tied to the FTSE 100 and Germany’s DAX trading flat, while those tied to the French CAC 40 were last seen trading 0.2% higher.

Euro Stoxx 50 futures are little changed.

European shares ended Thursday’s session higher after Moscow confirmed Russian President Vladimir Putin was scheduled to meet with U.S. counterpart Donald Trump within days.

— Chloe Taylor