European stock markets were set for a third straight week of gains on Friday, following the positive performance of Wall Street. Investors were encouraged by the US Federal Reserve’s recent interest rate cut and continued to believe more cuts would follow in 2026.
The main pan-European STOXX 600 index rose by 0.4%, moving close to a new all-time high. Major country markets, including Spain’s IBEX (up 0.8%) and Germany’s DAX (up 0.6%), were also trading higher.
The banking sector was strong, with shares of UBS jumping 4.4% to a 17-year high after Swiss lawmakers suggested easing new capital rules for the bank.
European markets were lifted by overnight gains in the US, where the S&P 500 and the Dow closed at record highs, as the Fed’s comments were seen as less aggressive than feared. Investors also largely ignored persistent worries about the high valuations of tech companies, even after disappointing forecasts from Oracle and Broadcom.
The basic resources sector advanced 0.5% as copper prices hit a new record high, supported by China’s promise of future financial stimulus and the Fed’s rate cut.
Other sectors also gained, with Lufthansa shares climbing 5.5% after an analyst upgrade, and retailers like Adidas and Puma rising over 2% after good news from their US peer, Lululemon Athletica. LPP, a Polish fashion retailer, was the best performer on the STOXX 600, surging 11.2%.
On the FX front, the US dollar remained stable on Friday, but it is still heading for its third consecutive weekly decline, largely due to expectations that interest rates will be cut next year.1
Meanwhile, the British pound held steady even after new data revealed the UK economy unexpectedly shrank in the three months leading up to October, a development that could increase anticipation of future Bank of England rate cuts.
The US Dollar Index (DXY), which tracks the dollar against six other major currencies, was flat at 98.34 and is on track for a 0.64% weekly loss. The index has dropped over 9% this year, putting it on pace for its sharpest annual decline since 2017.
Against this weaker dollar, the euro was trading at 1.1737 (near a two-month high), and the pound was firmer at 1.3383 (near a seven-week high).
The Japanese yen weakened slightly, trading at 155.87 per dollar, ahead of the Bank of Japan’s meeting next week where a rate hike is widely anticipated.
Finally, the Swiss franc was stable at 0.7951 per US dollar, following its rise to a nearly one-month high on Thursday. .
Currency Power Balance