European Shares Reach Highest Level in Two Months

By Twesha Dikshit and Sukriti Gupta

(Reuters) – European shares closed at their highest level in over two months on Thursday, with aerospace, defense stocks, and financials providing significant gains as investors evaluated recent corporate earnings.

The pan-European STOXX 600 index rose 0.6%, achieving a two-week intraday high.

Industrial stocks led the sectoral gains, particularly aerospace and defense firms. The broader index gained 2.2%, recovering from earlier pressures ahead of Friday’s summit between U.S. President Donald Trump and Russian President Vladimir Putin.

Richard Flax, chief investment officer at Moneyfarm, noted expectations for increased European defense spending but questioned the timing and extent of benefits for European companies.

Positive corporate earnings reports also bolstered market sentiment. Insurers were up 0.9% after nearing record highs seen last Thursday.

London’s Admiral reached a record high, climbing 6.6% following a strong first-half profit, while Aviva surged 2.6% to its highest since December 2007 after raising its interim dividend based on a stronger half-year operating profit.

Conversely, Dutch payments firm Adyen saw a decline of 4.9% after it cut its annual revenue forecast.

Most regional indexes saw gains, with Britain’s FTSE recovering from earlier losses to increase by 0.1%.

Markets have shown recent increases due to optimism surrounding a potential interest rate cut by the Federal Reserve next month. However, U.S. economic data dampened expectations for a 50bps cut next month.

“There’s kind of continued optimism about prospect for lower rates in the US… PPI figures today tempered things a little bit, but the expectation continues to be that we’ll see rates come down,” Flax stated.

Data revealed that Britain’s economy slowed less than anticipated in Q2 2025, despite U.S. trade tariffs and a weakening job market, providing some relief to Finance Minister Rachel Reeves.

In other news, Embracer’s stock plummeted 23.4%, its worst day since May 2023, after the gaming company reported a Q1 operating profit and forecasted annual earnings far below market predictions.

Thyssenkrupp’s shares fell 8.7% after the german conglomerate adjusted its full-year outlook for investments and sales due to disruptions caused by U.S. tariffs.

FLSmidth rose 6.7%, the largest gain on the STOXX 600, following the Danish mining and cement technology supplier’s Q2 report and updated annual forecast.

Carlsberg dropped 7.1% after the Danish brewer missed halfway profit and volume projections and warned of no expected improvement in the consumer environment this year.