Europe close: Stocks rise as AI concerns fade

25th Feb 2026 16:40

(Sharecast News) - European shares closed higher on Wednesday as investors reacted with initial relief that the latest US tariff regime remained at 10%, rather than the 15% threatened by president Donald Trump, while concerns about the impact of artificial intelligence on jobs also eased.

"Markets are back in rally mode as investors gird themselves for Nvidia's earnings," said Chris Beauchamp, chief market analyst at IG, pointing to a broader improvement in risk appetite.

The pan-European Stoxx 600 rose 0.69% to 633.48.

Germany's DAX gained 0.74% to 25,171.08, France's CAC 40 added 0.47% to 8,559.07 and the FTSE 100 outperformed with a 1.18% advance to 10,806.41.

"There seems no stopping the FTSE 100. Another week like this and the index will top 11,000, just weeks after it first crossed the magic 10,000 level," Beauchamp said.

"It has the winning combination for investors right now - a lower valuation than pricey US markets, and key sectors driving that are much less vulnerable to AI-driven panic selloffs.

"Mining, defence and banking have all yet to be touched by an AI competitor, while its pharma stocks provide further heft and dividend payments too.

"It might be smaller than Nvidia, but it continues to charm global investors."

Russ Mould, investment director at AJ Bell, noted that the FTSE 100 resumed its upwards charge after well-received results from HSBC "reenergised" markets.

"The UK index hit a new intraday high of 10,778 in early trading as HSBC did some heavy lifting alongside Shell, and Relx extended yesterday's recovery rally after a nasty AI-related sell-off last month."

Mould said the "strong showing from the UK stock market so far in 2026, on top of a major success in 2025, bodes well for changing its reputation from unloved to admired."

Eurozone inflation slows to 16-month low

In economic news, fresh data showed eurozone inflation falling to a 16-month low in January.

Final estimates from Eurostat confirmed that annual consumer price inflation slowed to 1.7% from 2.0% in December, in line with the preliminary reading and marking the first print below the European Central Bank's 2.0% target since May 2025.

The rate was also well below the 2.5% recorded a year earlier.

Energy prices declined 4.0% year-on-year following a 1.9% drop in December, while core inflation eased to 2.2% from 2.3% as services inflation slowed to 3.2% from 3.4%.

Food, alcohol and tobacco inflation edged up to 2.6% from 2.5%, though processed food, alcohol and tobacco eased to 2.0% from 2.1%.

The lowest inflation rates were seen in France at 0.4% and Italy at 1.0%, while Slovakia and Estonia recorded the highest at 4.3% and 3.8% respectively.

Ipek Ozkardeskaya, senior analyst at Swissquote, said softening inflation "could allow the European Central Bank to act if trade tensions flare and threaten economies".

In Germany, the economy expanded by 0.3% in the fourth quarter of 2025 compared with the previous three months, confirming earlier estimates.

Exports of goods and services fell 0.6% quarter-on-quarter, with goods exports down 0.4% and services exports declining 1.2%, according to Destatis.

Imports slipped 0.3%, reflecting a 1.5% drop in services imports while goods imports rose 0.2%.

Destatis president Ruth Brand said that "2025, a year of economic ups and downs, therefore ended with an increase in economic output", adding that growth was primarily driven by household and government consumption and a substantial rise in construction investment.

However, German consumer sentiment deteriorated ahead of March.

The GfK and NIM consumer sentiment index fell to -24.7 from a revised -24.2, with willingness to buy dropping sharply to -9.3 from -4.0.

Rolf Buerkl, head of consumer climate at NIM, said: "Even though the economy appears to be recovering slightly, consumers remain skeptical," citing geopolitical tensions and social policy challenges as factors likely to keep uncertainty elevated.

HSBC in the green, Diageo tanks

In equities, HSBC rose 7.12% after reporting better-than-expected annual results despite a 7.4% fall in pre-tax profit.

"HSBC has a spring in its step after saying business is going well and it can do even better in the future," Mould said.

"Investors are lapping it up, sending the share price to a new all-time high."

SEB jumped 4.9% after the small appliance and Tefal maker beat expectations and unveiled a cost-saving plan that could lead to up to 2,100 job cuts.

Hiscox gained 5.27% after announcing a $300m share buyback alongside annual results, while tank storage group Koninklijke Vopak climbed 7.31% on a jump in profits.

On the downside, Diageo slumped 14.83% after cutting full-year guidance and halving its dividend, citing weak trading in North America.

Aston Martin Lagonda fell 2.9% after the luxury carmaker said it would cut 20% of its workforce in 2026, generating £40m in savings, as tariffs in the US and China weighed on earnings.

Revenue dropped 21% to £1.26bn in 2025, operating losses widened to £259.2m and wholesale volumes declined 10% to 5,448.

Reporting by Josh White for Sharecast.com.