European markets experienced widespread gains on Wednesday, with several indices reaching unprecedented highs. This positive movement was spurred by encouraging earnings reports and hopeful anticipation surrounding potential interest rate cuts by the Federal Reserve and other central banks, including the European Central Bank (ECB), within the year.
The markets also found support following U.S. President Donald Trump's announcement regarding substantial investments in the United States' artificial intelligence infrastructure. During a conversation with Bloomberg TV's Francine Lacqua in Davos, Switzerland, ECB official Klaas Knot expressed support for imminent rate cuts. Knot noted that investors' expectations for interest rate reductions in January and March were sensible, but emphasized the challenges of making further commitments due to global uncertainties.
However, some gains were constrained by concerns over potential tariff threats from President Trump. The American president reiterated the possibility of imposing tariffs on European imports and mentioned discussions around an additional 10% tariff on Chinese goods starting in February. Responding to these threats, Valdis Dombrovskis, the European Union's Commissioner for the Economy, stated that Europe would react to any U.S. tariffs in a proportionate manner.
On the day, the pan-European Stoxx 600 rose by 0.39%, Germany's DAX increased by 1.01%—significantly driven by Adidas' strong performance—while France's CAC 40 improved by 0.86%. Conversely, the U.K.'s FTSE 100 saw a slight decline of 0.04%, and Switzerland's SMI ended with a gain of 0.8%.
Among European markets, Denmark, Finland, Iceland, Norway, Poland, Russia, Sweden, and Turkey closed with gains. Meanwhile, Austria, Belgium, Greece, Ireland, Portugal, and Spain experienced declines, with the Netherlands ending relatively unchanged.
In the U.K., shares of Intermediate Capital surged approximately 6.5% due to their report of $106.571 billion in assets under management (AUM) at constant currency as of the third quarter ending December 31, 2024—an annual increase of 27.5% and a 5.1% rise from the previous quarter. Other notable gainers included Halma, Entain, and Aviva, with increases ranging from 3.4% to 4.3%. Also advancing were Smiths, Diploma, Scottish Mortgage, Intercontinental Hotels, Rolls-Royce Holdings, and Spirax-Sarco Engineering, each gaining between 1.5% and 2%.
Conversely, EasyJet shares dropped 4.8%, despite the airline reporting a narrower pre-tax loss for Q1. The headline pre-tax loss for the quarter ending December 31, 2024, was £61 million, compared to a £126 million loss in the same period the previous year. Other decliners included Vistry Group, United Utilities, Croda International, Auto Trader Group, Coca-Cola, Vodafone, Severn Trent, Centrica, and Anglo American Plc, with declines between 1.5% and 2.7%.
In Germany, Adidas shares rose 6%, reporting a substantial 24% increase in fourth-quarter 2024 revenues to €5,965 million from €4,812 million the previous year. The quarter also saw Adidas' operating profit reach €57 million, contrasting with a €377 million operating loss from the previous year. Meanwhile, Siemens Energy appreciated approximately 6.7%, and Munich Re climbed 4.1%, with Sartorius, Puma, Hannover Re, MTU Aero Engines, Rheinmetall, and SAP advancing between 2% and 3.5%.
Siemens, Beiersdorf, HeidelbergCement, and Deutsche Boerse also posted solid gains, while Porsche, RWE, Bayer, Deutsche Post, E.ON, Zalando, Deutsche Telekom, Vonovia, and BASF saw declines ranging from 1% to 2.3%.
In the French market, Renault shares rose more than 3%, along with gains from Legrand, L'Oreal, Schneider Electric, Safran, Dassault Systemes, and Hermes International, each up 2% to 3%. Solid performances were also noted for LVMH, Accor, Essilor, AXA, Bouygues, Airbus, Air Liquide, Thales, and Edenred. In contrast, Carrefour shares fell about 2.5%, with ArcelorMittal, Vivendi, Veolia, Kering, BNP Paribas, Engie, Teleperformance, and Credit Agricole also declining between 1% and 2.3%.
Meanwhile, the Office for National Statistics reported that the U.K.'s budget deficit more than doubled in December compared to the previous year due to increased spending outpacing revenue growth. Public sector net borrowing rose by £10.1 billion from the prior year to £17.8 billion in December, marking the highest December borrowing in four years and surpassing the £14.6 billion forecast by the Office for Budget Responsibility. Additionally, borrowing for day-to-day public sector operations increased by £7.3 billion to £10 billion, the highest December deficit in two years. Borrowing for the financial year up to December totaled £129.9 billion, £8.9 billion more than at the same period in the previous financial year.
