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STOXX reaches record levels after French stock market turmoil

European shares reached record highs Wednesday, boosted by gains in French, Spanish and other stocks. Steelmakers also rallied following the EU's announcement of plans to reduce steel import quotas.

The pan-European STOXX 600 closed at its highest level since 2007, with a 0.8% gain, while French stocks rose 1.1%, and Spanish stocks reached their highest mark in 2007.

The DAX in Germany closed at a three-month high.

The STOXX 600 was boosted by banks, which added over 1%. British lender Lloyds rose after the UK's financial watchdog proposed a smaller-than-expected compensation package over motor finance mis-selling, easing investor concerns.

Societe Generale, BPER Banca and Italy's BPER Banca have also joined in the rally. This has led to broad gains for the sector.

Steelmakers Surging

After the European Commission proposed slashing the tariff-free import quotas of steel by almost half, shares of ArcelorMittal and Aperam rose between 4% and 7%. The basic resources index increased by 1.9%.

BMW, on the other hand, fell 8.2% as the automaker lowered its earnings forecast for 2025 due to a change in U.S. Tariff assumptions and a weaker than expected growth in the Chinese Market.

Mercedes' rival, BMW, fell 2.9% while the auto index as a whole declined 2.1%.

France's political instability remained at the forefront as the caretaker

Prime Minister Sebastien Lecornu

The government struck a cautiously positive tone and suggested that a budget agreement could be reached before the end of the year, potentially averting an election.

After a week of market turmoil, following Lecornu’s abrupt resignation, French mid-caps gained 0.7%.

The French benchmark is one of Europe's laggards by 2025. It has only gained 9% in the past year, lagging behind double-digit gains on most major exchanges.

The general opinion among clients is that new legislative elections will be held in the next week. However, there are few chances of France's deficit falling below 3% of GDP by 2030. There is also little hope for relief on the French bond markets for the time being, said Olivier Korber.

The technology stocks declined 0.6%. Chip-related companies ASML, ASMI and Applied Materials led the declines. This was after U.S. legislators called for wider bans on sales to China of chipmaking equipment.

The German economy ministry raised its growth forecast for 2025 on Wednesday. It now expects a modest expansion of 0.2%, up from a zero. They cited signs of a gradual improvement.

Puma, among other stocks rose 6.8% as BofA Global Research upgraded its rating of the German sportswear company to "neutral", from "underperform".

Umicore rose 5.5% after the Belgian Metal Recycling Group said it plans on selling its permanent gold inventory for around 410 million euro ($476 millions).

Unite Group dropped 10.7% following the British student accommodation developer's report of softer rental growth for the third quarter. (Reporting from Shashwat Chakrabarty and Pranav Kashyap, in Bengaluru; and Amir Orusov, in Gdansk. Editing by Saumyadebchakrabarty and Sonia Cheema.

(source: Reuters)