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European markets set to start the week higher, shrugging off credit concerns

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Original Story by CNBC
October 20, 2025
European markets set to start the week higher, shrugging off credit concerns

Context:

European markets are anticipated to commence the week positively, recovering from recent volatility linked to concerns over bad loans in the U.S. banking sector. Major indices such as the FTSE, DAX, CAC 40, and FTSE MIB are projected to rise by notable percentages, reflecting a cautiously optimistic outlook despite a previous decline in the pan-European Stoxx 600. While U.S. banks faced scrutiny due to reports of bad loans affecting investor sentiment, European banks have largely reported solid earnings with no negative surprises. Key earnings reports are on the horizon, with major companies like L'Oreal and SAP set to announce results this week, while U.S. stock futures also edged higher in anticipation of significant earnings and inflation data. Additionally, Asia-Pacific markets noted gains, buoyed by China's GDP growth of 4.8%, aligning with analysts' forecasts.

Dive Deeper:

  • European stock indices are set to open higher on Monday, with the FTSE expected to rise by 0.32%, DAX by 0.67%, CAC 40 by 0.62%, and FTSE MIB by 0.65%, indicating a rebound from previous market jitters. The previous Friday saw the pan-European Stoxx 600 drop 0.95% due to concerns surrounding the U.S. banking sector, particularly following announcements from Zions and Western Alliance about bad loans.

  • Despite the credit concerns in the U.S., European banks have performed strongly this year, with a reported 40% increase, leading to high market expectations. Christian Edelmann from Oliver Wyman highlighted that European financial institutions have not faced negative earnings surprises, which contrasts with the credit issues reported by U.S. lenders.

  • The upcoming week will witness several important earnings reports from major companies, including L'Oreal, SAP, and Barclays, with L'Oreal already announcing a significant acquisition of Kering's beauty and fragrance business for €4 billion. Earnings releases are expected to provide critical insights into the health of European markets amid the ongoing scrutiny of the banking sector.

  • U.S. stock futures are also showing positive movement as investors prepare for a busy week of earnings reports and inflation data, including figures from Netflix, Coca-Cola, and Tesla. The upcoming consumer price index report is particularly significant as it will provide insights into inflation trends amidst a government data blackout caused by the U.S. shutdown.

  • Asia-Pacific markets reported gains driven by China's economic growth, which registered a year-on-year GDP increase of 4.8% for the July-to-September period, matching analysts' expectations. This positive data from China contributed to a global market uplift as investors reassessed economic indicators and their potential impacts on investment strategies.

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