(Reuters) – European stock markets opened flat to marginally higher on Monday as a Deutsche Bank and HSBC-led rise in banking shares offset a fall in airlines following a profit warning from Germany’s Lufthansa.

Deutsche, which has been cutting back and reorganizing for months, gained 3% after the Financial Times reported that the German lender is planning to create a “bad bank” that would house or sell assets valued at up to 50 billion euros.

Asia-focused Standard Chartered and HSBC also rose about 1%, tracking a rise in Asian markets after Hong Kong’s leader Carrie Lam climbed down on the extradition bill at the center of a week of protests in the city.

The pan-European STOXX 600 index rose 0.04% by 0800 GMT, with the travel and leisure sector underperforming the other major European sectors.

Lufthansa plunged 12.3%, and was the biggest percentage faller on the STOXX 600, after the group lowered its profit outlook for the full year 2019, citing price competition from low cost rivals in Europe.

“Lufthansa signaling a weak outlook is hitting all these bigger carriers and that’s definitely one negative element this morning,” said Chris Beauchamp, chief market analyst at IG.

International Consolidated Airlines (IAG) fell 3.2%, while budget airlines EasyJet and Ryanair Holdings slipped at least 4%.

Banking stocks rose 1% ahead of a pivotal Federal Reserve policy meeting starting Wednesday where investors on balance think an interest rate cut is unlikely while backing a shift towards one in July.

“Overall there is positivity in markets that we might see a bit more dovish Fed this week. Though we probably will not see any action from the Fed, the commentary could be more dovish,” Beauchamp said.

A swing in money market pricing towards up to three rate cuts by the Fed this year have been at the heart of a recovery for stock markets this month after their worst falls in months in May.

The rally has run out of steam in the past week, however, as traders trimmed those expectations from their peaks, and the strength of the dollar against the euro in recent days may offer a fillip to many European companies.

Corporate newsflow continues to show a plethora of business problems, ranging from Brexit and nervousness among consumers to Italy’s budget problems and the range of pressures on many airlines.

UK-based Kier Group Plc tumbled 11.4% after the construction and services group said it would cut 1,200 jobs, sell non-core businesses and suspend its dividend for two years in an attempt to lower debt.

Babcock International Group Plc gained 4.6% after the engineering services group confirmed it had rejected a buyout offer from rival Serco Group in January.

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