European Markets Rally on US Shutdown Relief with Record Highs Across Major Indices

This analysis is based on the CNBC report [1] published on November 12, 2025, which documented European markets’ strong performance amid optimism over U.S. government shutdown resolution.

European markets demonstrated robust across-the-board gains, continuing positive momentum from earlier in the week. The pan-European STOXX 600 Index advanced 0.71% to close at 584.23 points, marking another record high in a series of consecutive record closes between November 10-12, 2025 [1][3]. The rally was broadly based, with most major European bourses and sectors posting positive results.

• Germany’s DAX: +1.22% to 24,381.46 [1]
• France’s CAC 40: +1.04% to 8,241.24 [1]
• UK’s FTSE 100: +0.12% to 9,911.42 [1]
• Italy’s FTSE MIB: +0.80% to 44,792.64 [1]
• Spain’s IBEX 35: +1.39% to 16,615.80 [1]

The rally was primarily fueled by growing optimism that the longest U.S. government shutdown in history, which began on October 1, could end as soon as the end of the week [2]. The Senate had passed a spending bill on Monday evening, moving it to the House for a final vote scheduled later on Wednesday [1][2]. Markets were pricing in a successful resolution, which would restore economic data releases, federal worker pay, and government services that had been disrupted for over six weeks [2].

The financial sector emerged as the clear leader of the rally, with both the STOXX 600 and FTSEurofirst 300 hitting record highs driven by bank stocks [2][3]. This sector-specific strength suggests investors were positioning for improved economic conditions and potentially more accommodative monetary policy following the shutdown’s resolution.

SSE PLC experienced exceptional performance, soaring 16.8% after announcing a £2 billion ($2.6 billion) equity raise to fund a comprehensive £33 billion investment plan for upgrading the UK’s electricity network [1]. This substantial capital commitment signals confidence in long-term energy infrastructure demand and received strong market approval.

Germany’s RWE advanced 9.1% after reporting robust nine-month results, including pre-tax income of €2.71 billion and adjusted EBITDA of €3.48 billion, both exceeding analyst expectations [1]. The strong performance reflects continued demand for reliable energy infrastructure and favorable market conditions.

Infineon Technologies added 6.9% despite reporting a 2% year-on-year decline in full-year revenues to €14.6 billion [1]. The positive market reaction suggests the results met or exceeded forecasts, indicating resilience in the semiconductor sector despite broader economic challenges.

The European rally was part of broader global market optimism, with MSCI’s global equities index rising 0.16% to 1,010.83 [2]. The interconnected nature of modern markets was evident in how U.S. political developments directly influenced European asset prices.

U.S. markets showed mixed performance, with the Dow Jones Industrial Average gaining 0.55% to 48,282.33, while the S&P 500 fell 0.26% to 6,849.63 and the Nasdaq declined 0.71% to 23,396.51 [0][2]. This divergence suggests sector rotation and varying risk appetites across different market segments.

Asian markets were generally positive, with the Japanese yen falling to nine-month lows against the dollar at 154.72, prompting concerns from Japanese Finance Minister Satsuki Katayama about negative economic impacts [2].

The bond market provided crucial insights into expectations for Federal Reserve policy. U.S. Treasury yields declined significantly across the curve:

• 10-year Treasury yield: -4.5 basis points to 4.065% [2]
• 30-year bond yield: -4.2 basis points to 4.6598% [2]
• 2-year note yield: -2.7 basis points to 3.564% [2]

This yield curve compression reflected growing expectations that the end of the government shutdown would provide economic clarity and potentially support more accommodative Fed policy [2]. The market’s anticipation of rate cuts suggests investors believe the shutdown’s economic drag may warrant policy easing.

Currency movements revealed underlying geopolitical tensions:

• The British pound fell 0.1% against the dollar to $1.313 and 0.2% versus the euro amid political uncertainty surrounding Prime Minister Keir Starmer’s leadership [1][2]
• The Japanese yen’s continued weakness to nine-month lows raised concerns about potential intervention from Japanese authorities [2]
• The U.S. dollar gained 0.03% against a basket of currencies to 99.48 [2]

These currency dynamics highlight how political developments and central bank policies create cross-asset correlations that investors must monitor.

Commodity markets provided additional context for economic expectations:

• Oil prices fell more than 3% on oversupply concerns, with U.S. crude down 3.72% to $58.77 and Brent falling 3.33% to $62.99 [2]
• Gold rose 1.41% to $4,184.48 per ounce, supported by expectations of Fed rate cuts [2]

The divergence between oil and gold reflects complex market dynamics, with oil weighed down by supply concerns while gold benefited from monetary policy expectations.

The analysis was conducted before the House vote on the spending bill. A rejection could trigger significant market volatility and renewed uncertainty [2]. This represents the most immediate and material risk to the positive market sentiment.

With economic data releases paused during the shutdown, markets lack recent information on employment, inflation, and other key indicators [2]. This information vacuum could lead to mispricing and increased volatility when data resumes.

The yen’s continued weakness could trigger intervention from Japanese authorities, potentially creating currency market disruption [2]. Such intervention could have spillover effects on other asset classes.

Reports of potential challenges to Prime Minister Starmer’s leadership could significantly impact UK market stability and investor confidence [1][2]. The FTSE 100’s relatively modest gain (+0.12%) compared to other European indices may reflect these concerns.

While European banks led the rally, their exposure to potential economic slowdowns and regulatory changes warrants careful monitoring [2][3]. The sector’s strong performance may be pricing in overly optimistic economic scenarios.

SSE’s massive £33 billion investment plan and its positive market reception need closer examination for long-term implications [1]. Such large-scale infrastructure commitments could face execution risks and regulatory challenges.

The strong market reception to SSE’s equity raise suggests continued appetite for energy infrastructure investments [1]. Similar opportunities may exist in other sectors undergoing transition.

Banking stocks’ leadership position indicates potential for continued outperformance if economic conditions improve [2][3]. However, this opportunity comes with heightened sensitivity to economic data surprises.

The bond market’s pricing of Fed rate cuts creates opportunities in rate-sensitive sectors, though timing remains uncertain [2].

European markets demonstrated strong performance on November 12, 2025, with the STOXX 600 gaining 0.71% to 584.23, driven primarily by optimism over an imminent end to the U.S. government shutdown [1]. The rally was broad-based, with Germany’s DAX (+1.22%), France’s CAC 40 (+1.04%), and Spain’s IBEX 35 (+1.39%) all posting significant gains [1].

The financial sector led the advance to record highs, while specific companies showed exceptional performance: SSE PLC (+16.8%) on its £33 billion network investment plan, RWE (+9.1%) on strong earnings, and Infineon Technologies (+6.9%) despite revenue declines [1]. Bond markets priced in Fed rate cuts, with Treasury yields falling across the curve [2].

Critical uncertainties remain around the House vote outcome on government funding, the release of delayed economic data, and UK political stability [1][2]. Currency markets showed particular sensitivity to political developments, with the pound and yen experiencing notable movements [2].

The analysis reveals a market positioned for continued positive momentum if the U.S. government shutdown resolves successfully, but vulnerable to significant volatility if political outcomes disappoint expectations.