French stocks revive after turmoil; STOXX at record highs

By Shashwat Chauhan, Amir Orusov and Pranav Kashyap

European shares climbed to record highs on Wednesday, powered by strong gains in French and Spanish stocks, and steelmakers rallied after the EU unveiled plans to slash steel import quotas.

The pan-European STOXX 600 SXXP was up 0.8%, closing at its highest level, while French stocks PX1 jumped 1.1% and Spanish stocks IBC touched their highest mark since 2007.

Germany's DAX DAX closed at a near three-month high.

Banks (.SX7P) were the biggest boost to the STOXX 600, adding over 1%. British lender Lloyds LLOY rose after the UK's financial watchdog proposed a smaller-than-expected compensation package over motor finance mis-selling, easing investor concerns.

Societe Generale GLE and Italy's BPER Banca BPE also joined the rally, fuelling broad gains across the sector.

STEELMAKERS SURGE

Steelmakers surged higher after the European Commission proposed slashing tariff-free steel import quotas by nearly half, sending shares of ArcelorMittal MT, Aperam APAM, Thyssenkrupp TKA and SSAB SSAB_A up between 4% and 7%. The broader basic resources index (.SXPP) rose 1.9%.

In contrast, BMW BMW tumbled 8.2% after the carmaker cut its 2025 earnings forecast due to changed U.S. tariff assumptions and weaker-than-expected growth in the Chinese market.

Rival Mercedes MBG fell 2.9%, while the broader autos index (.SXAP) eased 2.1%.

France's political uncertainty remained centre stage, as caretaker Prime Minister Sebastien Lecornu struck a cautiously optimistic tone, suggesting a budget deal could be reached by year-end - potentially averting a snap election.

French mid-caps (.CACMD) rose 0.7%, echoing gains in blue-chips, after markets slumped earlier this week following Lecornu's abrupt resignation on Monday.

The French benchmark remains one of Europe's laggards in 2025, up just 9% year-to-date, trailing double-digit rallies across most major bourses.

"The general view among clients was an expectation of new legislative elections in the coming week, but little chance of France's budget deficit returning to levels below 3% GDP before 2030 and little hope of relief for the French bond market for now," said Olivier Korber, a strategist at Societe Generale.

Technology stocks (.SX8P) fell 0.6%, with chip-related companies ASML ASML and ASMI ASM leading declines after U.S. lawmakers called for broader bans on sales of chipmaking equipment to China.

On the macro front, Germany's economy ministry nudged up its 2025 growth forecast on Wednesday, now expecting a modest 0.2% expansion, up from zero, citing signs of a gradual recovery.

Among other stocks, Puma PUM rose 6.8% after BofA Global Research raised its rating on the German sportswear group to "neutral" from "underperform".

Umicore UMI climbed 5.5% after the Belgian metal recycling group said it plans to sell its permanent gold inventories for about 410 million euros ($476 million).

Unite Group UTG fell 10.7% after the British student accommodation developer reported softer rental growth in the third quarter.