Europe close: Stocks touch fresh highs on AI, US shutdown optimism

12th Nov 2025 17:26

(Sharecast News) - European equities extended their rally on Wednesday, with the Stoxx 600 and FTSE 100 both reaching new highs as investors drew optimism from progress in Washington to end the US government shutdown and a robust slate of corporate earnings across the region.

The pan-European Stoxx 600 rose 0.71% to 584.24, while Germany's DAX gained 1.22% to 24,380.77 and France's CAC 40 advanced 1.04% to 8,241.24.

London's FTSE 100 edged up 0.12% to 9,911.42.

"The FTSE 100 continued to tick towards the 10,000 mark as it eked out some modest gains to trade at fresh all-time highs on Wednesday," said Russ Mould, investment director at AJ Bell.

"UK stocks made progress despite some volatility in the AI space in the US and Asia overnight.

"SoftBank's decision to sell its entire stake in Nvidia dragged the chip maker lower and also saw selling in the Japanese tech investor."

Mould added that "this, plus the negative reaction to yesterday's weaker than expected full-year guidance from AI infrastructure provider CoreWeave, suggests some growing nervousness about valuations in the artificial intelligence space.

"Corrections are a healthy and necessary fact of life in financial markets but investors will be wary of any signs this is turning into a pronounced sell-off.

"For now, we are not really in that territory but the stakes are ratcheting up ahead of Nvidia's third-quarter earnings update on 19 November."

The gains followed a vote in the US Senate earlier this week to approve a compromise bill extending federal funding until the end of January, though the measure still requires passage by the House of Representatives and presidential approval.

Patrick Munnelly, market and strategy partner at TickMill, noted that "the US government is making progress toward ending the shutdown, with a proposed bill set to provide a vote on expiring Affordable Care Act subsidies next month.

"The bill also includes temporary funding for the government through at least the end of January, covering the holiday season, and extended funding for certain agencies, such as the FDA and military construction projects, until next September."

Munnelly added that while this progress was encouraging, "the ongoing data vacuum persists.

"As a result, private reports have gained heightened attention, including ADP's new weekly private jobs report released on Tuesday.

"Market participants are bracing for a flood of delayed data once government agencies resume their operations."

German inflation eases slightly, as expected

In economic news, inflation in Germany eased slightly to 2.3% in October, the federal statistics office confirmed, aligning with preliminary estimates.

On a harmonised EU basis, inflation stood at 2.4% year-on-year, offering further evidence that price pressures in Europe's largest economy continue to moderate.

Munnelly also pointed to domestic macro developments, noting that "the unexpected rise in the UK unemployment rate to 5.0% yesterday sparked significant movement in the rates markets.

"By the end of the day, the market-implied probability of a December rate cut surged from approximately 70% to 85%, while gilt yields dropped by six to eight basis points."

He added that "the drop in labour input raises concerns about downside risks to the consensus GDP growth forecast of 0.2% quarter-on-quarter.

"As the week progresses, this labour market data could significantly influence market expectations for the December MPC meeting."

In the United States, mortgage applications rose modestly last week despite higher borrowing costs, the Mortgage Bankers Association reported.

Total applications increased 0.6% in the week to 7 November after a 1.9% decline previously, with purchases climbing 5.8% to their strongest level since September.

"Purchase applications for conventional, FHA, and VA loans increased, as potential homebuyers continue to shop around, particularly in markets where inventory has increased and sales price growth has slowed," said MBA economist Joel Kan.

Meanwhile, the International Energy Agency warned that global demand for oil and gas was set to keep rising for the next two decades as climate policy momentum weakens.

In its World Energy Outlook report, the Paris-based organisation projected oil demand could reach 113 million barrels per day by 2050, 13% higher than in 2024, and global energy demand could rise by 15%.

Banks, energy firms among the region's leading gainers

Banks were among the leading European equity gains, with ABN Amro rising 2.55% after posting upbeat quarterly results and announcing the acquisition of NIBC Bank to strengthen its domestic position.

UK energy utility SSE soared 16.84% after releasing results that impressed investors.

"Investors are energised by SSE's £33bn plan to upgrade Britain's electricity network," said Mould.

"This enthusiasm comes despite the dilution implied by raising £2bn in fresh equity to help fund the enormous investment.

"The promised growth alongside this spending is clearly helping the market warm to the deal."

He added that "while the roadmap unveiled today is undoubtedly eye-catching, delivering it by the end of the decade will be a challenge and shareholders and stakeholders will be keeping a beady eye on SSE's progress on this front for delays and any cost over-runs."

Germany's RWE climbed 9.13% following stronger-than-expected earnings, including nine-month adjusted EBITDA of €3.48bn, above forecasts.

Semiconductor maker Infineon Technologies gained 6.92% after lifting its 2026 revenue target for power supply chips used in AI data centres.

French voucher provider Edenred was a notable laggard, slumping 4.01% after cutting its 2026 profit forecast due to upcoming regulatory changes in Brazil.

Reporting by Josh White for Sharecast.com.