Europe close: Stocks jump on hopes of US shutdown-ending deal

(Sharecast News) - European equities surged on Monday, extending last week's rebound as optimism grew that the United States was moving closer to ending its record-long government shutdown. The pan-European Stoxx 600 climbed 1.5% to 573.29, marking its strongest session in nearly three weeks.

Germany's DAX advanced 1.72% to 23,976.07, France's CAC 40 rose 1.32% to 8,055.51, and London's FTSE 100 added 1.08% to 9,787.15.

"Stocks rallied while Treasuries took a hit as hopes for a resolution to the longest US government shutdown lifted market sentiment following a rollercoaster week marked by concerns over inflated artificial intelligence valuations," said Patrick Munnelly, market strategy partner at TickMill.

He added that "US and European equity futures also advanced after the Senate made progress on a critical procedural step toward reopening the government," as "investors embraced risk across various asset classes."

The rally followed news that the US Senate had narrowly approved a compromise bill to reauthorise funding and reverse some federal layoffs, signalling progress towards reopening the government.

The measure, however, still needed approval from the House of Representatives and president Donald Trump, and notably excluded healthcare subsidies sought by Democrats.

Russ Mould, investment director at AJ Bell, said: "Glimmers of hope that an end might be in sight to the longest running US government shutdown in history put markets in a positive mood."

He noted that "a vote in the Senate is an important first step but any agreement still needs to clear a vote in the House of Representatives along with several other hurdles."

Mould added that the lack of economic data "has created a considerable dose of the uncertainty which markets famously hate and it is also hampering the ability of the Federal Reserve to make informed decisions on interest rates."

Munnelly also pointed out that "resolving the shutdown would restore access to crucial economic data, including employment and inflation figures, giving investors a clearer lens into the Federal Reserve's policy outlook."

Investor sentiment fragile across the euro area

Investor sentiment in Europe remained fragile despite the market gains.

The latest Sentix survey showed eurozone investor confidence fell further in November, with the headline index dropping 2.0 points to -7.4, well below forecasts for improvement.

The report said there was "little sign of an autumn upturn," describing the region as being in a "growth crisis."

The current situation index fell to -17.5, while expectations slipped to 3.3, with Germany's reading of -38.3 indicating recessionary conditions.

"There is little impetus from politicians, and the central banks are waiting to see what happens," Sentix said.

Munnelly said "the week ahead promises to be UK-focused, with key updates on labour and wage data arriving on Tuesday," while across the eurozone, "the Sentix and ZEW surveys offer insights into economic sentiment."

He added that Thursday's ECB economic bulletin and Friday's third quarter GDP data "will round out a week of second-tier releases likely to shape the near-term policy narrative."

Trade developments also boosted sentiment, after China relaxed export controls on semiconductors made by Wingtech subsidiary Nexperia, easing fears of shortages in Europe's auto sector.

EU trade commissioner Maros Sefcovic said on X that "close engagement with both the Chinese and Dutch authorities continues as we work towards a lasting, stable, predictable framework" to restore chip flows.

Diageo jumps as it names new boss, biopharma sector in focus

In equities, Diageo shares surged 5.21% after the Guinness brewer named former Tesco chief executive Dave Lewis as its next CEO.

Kingspan Group jumped 6.84% following a report of an 8% rise in sales over the first nine months of the year.

In the pharmaceutical sector, Camurus soared 14.59% after announcing positive trial results for its obesity drug CAM2056, while Zealand Pharma gained 2.04%.

Novo Nordisk added 1.2% after unveiling a partnership with India's Emcure Pharmaceuticals to market Wegovy under a new brand, though it lost out to Pfizer in the $10bn takeover battle for Metsera.

Mould observed that "selling in some traditional defensive names, which have a material weighting in the index, meant the FTSE 100 slipped a bit behind its European counterparts on Monday."

He also noted renewed deal activity in the UK market, highlighting that "a trend that has boosted UK stocks in recent months reared its head again as private equity agreed a £2.7bn deal for JTC, which provides administrative services to investment funds."

Reporting by Josh White for Sharecast.com.