French stocks rose to a seven-month high on Thursday after the government survived a confidence vote, while a jump in Nestle buoyed the wider European market.
The pan European STOXX 600 closed up 0.7%, with gains in food and beverage stocks offsetting weakness in insurance stocks.
French Prime Minister Sebastien Lecornu survived two no-confidence votes with last-minute backing from the Socialist Party - a lifeline that came at the cost of suspending President Emmanuel Macron’s contested pension reform.
French blue-chip shares added 1.4%, the yield on the country’s 10-year bond fell to a two-month low and the euro climbed.
“As far as stocks in France are concerned, we should start seeing some realignment with global prospects as opposed to purely domestic ones because the concerns around the political uncertainty have reduced,” said Lilian Chovin, head of asset allocation at Coutts.
French stocks are up about 11% year-to-date, lagging a more than 21% rise for Germany’s DAX and a gain of 35% for Spain’s IBEX 35.
Chovin noted that a downgrade to France’s credit rating could still follow if the country’s deficit - nearly double the European Union’s 3% limit last year - remained “too large for too long”.
Shares of Nestle jumped 9.3%, for their biggest rise since 2008, after the world’s largest packaged food company reported stronger-than-expected sales and announced 16,000 job cuts under new CEO Philipp Navratil.
Better-than-expected earnings from major U.S. and European firms this week also helped lift sentiment after last week’s U.S.-China trade jitters.
STOXX 600 companies are expected to post a 0.5% increase in third-quarter earnings, according to LSEG IBES data, up from the 0.2% dip forecast a week ago.
Results from European banks and defence companies will be “interesting to watch”, said Janet Mui, head of market analysis at RBC Brewin Dolphin, because of their big share price surges since the start of the year.
German lab supplies maker Sartorius and its French unit Sartorius Stedim Biotech rose 7.6% and 9.6%, respectively, after the companies issued quarterly results and forecasts.
Pernod Ricard gained 4% after the French spirits maker reported its first quarter sales.
The UK’s Whitbread dropped 10.3% after the hotel and restaurant operator posted a 7% drop in half-year profit due to lower food and beverage sales.
German pharmaceuticals and technology company Merck gave muted guidance for 2026 that sent its shares down 3.9%.
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