STOXX 600 climbs on Fed cut hopes; banks rally post-UK budget announcement

By Anastasiia Kozlova, Purvi Agarwal and Tharuniyaa .

Nov 26 (Reuters) - Europe's main equity indexes closed higher on Wednesday, led by technology stocks as growing expectations of a U.S. rate cut boosted global risk appetite, while financials also found support following the UK budget announcement.

The pan-European STOXX 600 index .STOXX rose 1.06% to 574.01 points at the close, extending its winning streak to a third straight session.

Major regional indexes also firmed, with Germany .GDAXI and France .FCHI up about 1% and 0.9%, respectively.

Technology shares .SX8P were the biggest boost to the benchmark index, up 2.1%, tracking upbeat global sentiment as investors grew more confident about the possibility of a Fed rate cut in December.

Chip equipment maker ASML ASML.AS jumped 5.7%, BESI BESI.AS 4%, and chipmaker Infineon IFXGn.DE advanced 3.7%.

"We're continuing to see the Federal Reserve easing expectations drive risk appetite at the margin, and that's leading to this broad-based advance, not only in the U.S., but certainly looking at European markets today," said Laura Cooper, head of macro credit at Nuveen.

Bloomberg News reported, citing people familiar with the matter, that White House economic adviser Kevin Hassett, who has called for lower interest rates, was widely viewed as the leading contender for the post of Fed chair.

U.S. Treasury Secretary Scott Bessent said there were good chances of President Donald Trump announcing his pick for the Fed chair before Christmas.

Meanwhile in the UK, British finance minister Rachel Reeves announced a big tax-raising budget that will take more money from workers but kept banks exempted from fresh targeted taxes.

London's FTSE 100 .FTSE added 0.85%, boosted by shares in British banks. Lloyds Banking Group LLOY.L jumped 3.4%, NatWest NWG.L rose 2.2% and HSBC HSBA.L added 1.3%.

British trading platform IG Group IGG.L jumped 10.3% and was the top-performing stock on London's mid-caps index .FTMC as well as Europe's STOXX 600.

The pan-European banking index .SX7E jumped 1.6%, rising in conjunction with British peers. The bank-heavy Spanish benchmark index .IBEX was up 1.4%, outperforming its regional peers.

Progress on a Russia-Ukraine peace deal also buoyed sentiment across Europe after Ukrainian President Volodymyr Zelenskiy signalled readiness to push forward a U.S.-backed framework to end the war.

However, uncertainty lingered after President Donald Trump retracted the timeline for a deal, supporting oil prices and European defence stocks. European aerospace and defence index .SXPARO jumped 1.35%.

The STOXX 600, which saw its steepest weekly fall in over three months on Friday, is expected to put up a strong performance in 2026, with a Reuters poll indicating a 11% gain next year.

Among stocks, Novo Nordisk NOVOb.CO surged 4.7% after U.S. Medicare released negotiated prices for 15 costly drugs, including Wegovy and Ozempic, which analysts said were broadly in line with expectations.

Adecco ADEN.S fell 11.4%, marking its biggest single-day drop since March 2020, as investors fret about AI risks after the company reiterated its commitment to a 3%-6% margin corridor and leverage at or below 1.5 times by end 2027.

Spain's HBX HBX.MC plunged as much as 12% after reporting a much wider full-year loss.