European Shares Extend Gains As Fed Cut Optimism Lifts Global Sentiment

European equities advanced for the third consecutive week on Sunday, supported by a wave of renewed optimism that the U.S. Federal Reserve is preparing to cut rates early in 2026. The improving macro tone helped lift major indices across the continent, with banks, industrials, and consumer-focused sectors leading performance.

Investors continued rotating back into cyclicals, encouraged by stabilizing bond markets and softer U.S. economic data that strengthened the case for a more accommodative Fed. While volatility remains elevated across global markets, the momentum shift has offered European equities rare consistency after months of choppy trading.

Financial stocks were among the strongest performers, benefiting from expectations that lower U.S. rates could ease global funding pressures and improve credit conditions. Meanwhile, export-heavy sectors gained as the U.S. dollar extended its multi-week pullback, supporting demand for European goods.

The broader risk-on tone was mirrored across global markets. Asian indices firmed earlier in the session, and U.S. futures pointed modestly higher, reflecting improving sentiment as traders recalibrated expectations for next year’s monetary landscape.

In FX, the euro held near multi-month highs, supported by narrowing yield differentials. Commodity-linked currencies also strengthened, though gains were capped by lingering uncertainties surrounding energy demand and geopolitical tensions.

For traders, the key question now is whether this momentum can persist. Much will depend on upcoming U.S. inflation indicators, central bank communication, and whether the Fed continues to reinforce the idea that easing is on the horizon. If global conditions remain supportive, Europe could enter December with one of its strongest technical setups of the year.