(Sharecast News) - European shares climbed sharply on Tuesday, approaching record territory after progress in Washington towards ending the longest US government shutdown in history boosted investor confidence.
The pan-European Stoxx 600 rose 1.33% to 580.41, led by gains in London and Paris.
Germany's DAX added 0.57% to 24,096.25, France's CAC 40 advanced 1.25% to 8,156.23, and the FTSE 100 gained 1.15% to 9,899.60.
Russ Mould, investment director at AJ Bell, said the FTSE 100 made new record highs "taking its cue from a strong rebound on Wall Street and the added tailwind of sterling weakness".
He added that "moves towards the end of the shutdown in Washington had primed US stocks for big gains at the market open, and the pound fell after weak UK jobs figures which increased the prospect of an interest rate cut when the Bank of England meets next month".
Overnight, US Senators approved a bill to fund the federal government through the end of January, marking a breakthrough in a political impasse that had paralysed public services for weeks.
The measure passed by 60 votes to 40, with seven Democrats breaking ranks to back the legislation.
The bill would now move to the Republican-controlled House of Representatives, and if approved, go before president Donald Trump for signature.
Patrick Munnelly, market strategy partner at TickMill, noted that "traders on Wall Street moved into riskier market sectors, causing a rise in stocks along with Bitcoin as the US Senate pushed forward legislation to end the record-long government shutdown, alleviating a major economic obstacle".
He added that "the increased risk appetite drove the S&P 500 up by 1.5%, with technology stocks, which faced the most significant declines recently, spearheading the equity market rally".
German economic sentiment weakens, UK labour market data softens
In economic data, sentiment in Germany weakened in November, with the ZEW economic sentiment indicator falling to 38.5 from 39.3 in October, below forecasts for 41.0.
The index measuring current conditions also edged down to -78.7 from -80.0.
ZEW president Achim Wambach said the indicator "remains stable" overall but warned that confidence in the government's ability to tackle economic challenges was waning, adding that "although the investment programme is likely to provide economic stimulus, the structural problems continue to exist".
In the UK, fresh data pointed to a softening labour market.
The unemployment rate rose to 5.0% in the three months to September, its highest since the pandemic, while employment fell by 0.2 percentage points.
Average earnings grew by 4.6%, or 4.8% including bonuses, with pay growth led by the public sector.
Liz McKeown of the Office for National Statistics said the figures "point to a weakening labour market," with payroll numbers now falling across most of the past year.
EY Item Club's Matt Swannell said cooling wage growth "removes one potential roadblock to a pre-Christmas rate cut," while AJ Bell's Danni Hewson noted that "it's hard to see anything but a clear picture of a faltering labour market".
Retail sales growth also slowed as cautious consumers delayed purchases ahead of Black Friday.
The British Retail Consortium reported total sales up 1.6% in October, down from 2% in September and the weakest pace since May.
BRC chief executive Helen Dickinson said many shoppers "delayed spending, waiting for Black Friday deals," while warning that "looming Budget decisions risk undermining fragile consumer confidence".
Russ Mould said "poor retail sales only added to the impression of a weakening economy heading into a Budget which could further undermine consumer confidence".
He noted that a softer domestic currency "is typically good news for the FTSE 100 as it boosts the relative value of its dominant overseas earnings".
Food price inflation eased further, according to data from Worldpanel by Numerator, with UK grocery inflation slowing to 4.7% in the four weeks to 2 November from 5.2% previously.
Take-home grocery sales rose 3.2% as discount retailers extended their gains.
Lidl's sales jumped 10.8%, Aldi's rose 4.4%, and Tesco gained 5.9%, while Ocado recorded a 15.9% surge.
Fraser McKevitt of Worldpanel said supermarkets were "putting the emphasis on price cuts rather than multi-buy offers" to show value ahead of Christmas.
Vodafone rises on guidance life, Swiss luxury basks in Trump hint
In equities, Vodafone Group jumped 8.32% after raising its dividend for the first time in eight years and lifting its earnings guidance.
Russ Mould said Vodafone "ticked three boxes with its first-half results as it promised the first dividend increase in seven years, said it would hit the top end of profit and cash flow guidance, and returned to growth in its key German market".
He added that CEO Margherita Della Valle's transformation programme "has injected new life into the business" after years when Vodafone "has been a stock market zombie flailing around with little apparent purpose".
Swiss luxury and chemical names also gained after US president Donald Trump said he was working on a deal to cut tariffs on Swiss exports, sending Richemont up 1.99%, Swatch Group up 6.09%, and Givaudan up 1.93%.
On the downside, Infrastructure Wireless Italiane slumped 11.76% after cutting its revenue outlook for next year despite posting a quarterly profit increase.
Reporting by Josh White for Sharecast.com.
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