European shares jump on Ukraine peace prospects, US rate cut hopes

By Anastasiia Kozlova and Purvi Agarwal

Nov 25 (Reuters) - European shares extended gains on Tuesday, led by materials and financial stocks, as investors continued to draw optimism from prospects of a ceasefire in Ukraine and expectations of interest rate cuts in the world's largest economy.

The pan-European STOXX 600 .STOXX closed up 0.91% at 568.01. Major regional bourses also ended higher, with Germany's DAX .GDAXI and France's CAC .FCHI up 1% and 0.8%, respectively.

Prospects for an end to the nearly four-year-old Russia-Ukraine war continued to drive the STOXX 600 index, with European construction and materials stocks .SXOP extending their rally, up 2.4%. Germany's Heidelberg Materials HEIG.DE jumped 6.6%, cement maker Buzzi BZU.MI rose 6.1%, and stone-wool manufacturer Rockwool ROCKb.CO surged 4.5%.

Ukraine on Tuesday signalled support for the framework of a peace deal with Russia but stressed that sensitive issues needed to be fixed at a meeting between President Volodymyr Zelenskiy and U.S. President Donald Trump.

The European defence sector .SXPARO was up 1% after sliding over 5% in the last two sessions on expectations that the war in Ukraine was approaching its end.

The European Parliament approved a 1.5 billion euro ($1.7 billion) scheme to fund defence investments across the EU and support Ukraine, while Britain separately pledged to deliver more air defence missiles to Kyiv in the coming weeks.

"It's been back and forth since last week with the peace-talk news, but it looks like the Russians are not going to play ball and the deal could just fizzle out. That means Europe still needs to spend more on defence, which would've been the case anyway," said Chris Beauchamp, chief market analyst at IG Group.

Meanwhile, global markets assessed a mixed set of delayed U.S. data that largely kept expectations of a Federal Reserve interest rate cut in December intact.

Odds for a December rate cut stood at 82.7%, according to the CME Group's FedWatch tool.

The data comes after Fed Governor Christopher Waller suggested that continued weakness in labour data could warrant another quarter-point rate cut in December, supporting New York Fed President John William's comments.

Back in Europe, banks .SX7E jumped 1.8%, mirroring their British peers ahead of UK Finance Minister Rachel Reeves' budget announcement on Wednesday. A Goldman Sachs note cited a Financial Times article indicating that the banking sector would be exempted from tax increases.

The week's initial gains provide a much-needed respite for the STOXX 600 index, which retreated from its mid-November record highs following a selloff in global risk assets amid mounting concerns over an overheated AI-driven rally and expectations that the Fed might hold off on a December rate cut.

Among top movers, Dutch bank ABN Amro ABNd.AS surged 6.4% after announcing plans to cut 5,200 full-time jobs by 2028 as part of its cost-cutting promises.

Kingfisher KGF.L jumped 5.9% after the home improvement retailer upgraded its full-year profit outlook.

In contrast, Beazley BEZG.L tumbled 9.3% to be the worst STOXX 600 performer after cutting its written premium outlook, citing intensifying competition and weak growth in cyber insurance.

Thyssenkrupp Nucera NCH2.DE fell 9.3% after projecting sharply lower sales in 2026.

A spokesperson for the Spanish stock exchange said the stock market was trading normally, but index values were not displayed due to a technical error.