Europe close: Stocks manage gains amid geopolitical optimism
By Josh White
Date: Monday 27 Oct 2025
(Sharecast News) - European stocks edged higher on Monday, with major indices setting fresh record highs as optimism over US-China trade talks and improved German business sentiment lifted investor confidence.
The pan-European Stoxx 600 rose 0.22% to 577.03, as Germany's DAX added 0.28% to 24,308.78, France's CAC 40 gained 0.16% to 8,239.18, and London's FTSE 100 was up 0.09% at 9,653.82.
"Optimism about the potential for a US-China trade agreement was helping to create a cautiously positive mood in markets at the start of the week," said Russ Mould, investment director at AJ Bell.
"Global stocks continued their record setting rally, fuelled by growing optimism that the United States and China are edging closer to finalising a trade deal," added Patrick Munnelly, market strategy partner at TickMill.
Hopes for a breakthrough in trade negotiations between Washington and Beijing drove gains after US officials said China was likely to postpone export controls on rare earths.
US Treasury secretary Scott Bessent said the two sides had drawn up a "very substantial framework" for a deal.
Munnelly noted that "after months of uncertainty, easing trade tensions between the world's two largest economies have reignited appetite for risk-taking and added fuel to the equity rally that began after April's market slump."
"Global markets are kicking off the week in upbeat fashion as geopolitics takes centre stage, with trade optimism giving investors something to cheer about," said Hargreaves Lansdown analyst Matt Britzman.
Munnelly added that the optimism "also drove sharp gains in copper and crude oil prices, while Treasuries saw a pullback across the board and gold lost ground as demand for safe-haven assets waned."
German business sentiment improves in September
Economic data added to the positive tone.
The Ifo Institute's business climate index for Germany rose to 88.4 in October from 87.7 in September, signalling improving sentiment in Europe's largest economy.
The expectations index climbed to 91.6 from 89.8, while the current conditions measure slipped slightly to 85.3.
"Companies remain hopeful that the economy will pick up in the coming year," said Ifo president Clemens Fuest.
However, Carsten Brzeski, global head of macro at ING, cautioned that "despite today's Ifo index increase, the risk of yet another year of stagnation is still alive and kicking," adding that while the reading offers "some hope of a possible rebound," past upticks in leading indicators have often "disappeared into thin air."
In the UK, retail activity remained subdued.
The Confederation of British Industry's retail sales volume balance came in at -27 in October, compared with -29 in September, marking the 13th consecutive month of falling annual sales.
The CBI said firms expect sales to deteriorate further in November amid weak confidence and concerns ahead of next month's Autumn Budget.
"Persistent uncertainty ahead of the Autumn Budget is deepening the strain on retailers and other distribution firms that are still grappling with the effects of last year's fiscal decisions," said CBI principal economist Martin Sartorius.
He urged the Chancellor to avoid new business tax increases and to reconsider the proposed Employment Rights Bill.
Bank shares in focus across the region
In equities, HSBC shares ended flat after the lender said it would take a $1.1bn impairment charge in its third-quarter results following an unsuccessful appeal in a Luxembourg lawsuit linked to Bernard Madoff's Ponzi scheme.
"As Halloween approaches, an episode out of what feels like the dim and distant past has returned to haunt HSBC and hardly set the scene for the bank's third-quarter update tomorrow in a way it would have wanted," said Mould.
"A ruling from Luxembourg's highest court on a lawsuit, brought by investors who lost money in Bernard Madoff's multibillion-dollar Ponzi scheme, will see HSBC set aside a material sum.
"Although, it is testament to the bank's scale that a provision of more than $1bn is a relatively minor irritation rather than a disaster."
Mould added that "CEO Georges Elhedery's restructuring plan for HSBC has, for the most part, been well received since he took charge just over 12 months ago.
"However, this latest setback, following on from a poorly received decision to put buybacks on the back burner as HSBC puts cash towards buying out minority investors in Hong Kong lender Hang Seng bank, does put the chief executive under a bit of pressure.
"The recent departure of chair Mark Tucker means he is lacking a bit of boardroom support too."
Elsewhere, Porsche rose after reporting third-quarter sales revenue of €26.9bn, down from €28.6bn a year earlier, while Portugal's Galp Energia climbed after posting adjusted third-quarter net profit of €407m, ahead of analysts' forecasts.
Copenhagen-listed Sydbank jumped after announcing a merger with Arbejdernes Landsbank and Vestjysk Bank to form AL Sydbank, which will rank among Denmark's five largest lenders.
Barclays advanced after Saudi Arabia confirmed it would soon recognise the bank's regional headquarters, granting it a provisional licence to conduct investment banking operations.
Reporting by Josh White for Sharecast.com.
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