Europe close: Stocks finish higher after cautious start
By Josh White
Date: Tuesday 21 Oct 2025
(Sharecast News) - European equities advanced on Tuesday, extending the previous session's gains led by banking and defence stocks, as investors weighed fresh warnings from the Bank of England over risks in private credit markets and new fiscal data out of the UK.
The pan-European Stoxx 600 rose 0.21% to 573.30, while Germany's DAX added 0.29% to 24,330.03, France's CAC 40 climbed 0.64% to 8,258.86 and London's FTSE 100 edged up 0.25% to 9,426.99.
Russ Mould, investment director at AJ Bell, noted the sharp reversal in market tone in recent days. "It's hard to imagine that markets were in panic mode only four days ago.
"It's like all the troubles faded away over the weekend, and investors are back in risk-on mode," he said.
"Wall Street enjoyed a particularly strong session on Monday, and that optimism has extended to Asia and Europe on Tuesday."
UK public borrowing hits five-year high
London's blue-chip index rose despite data showing UK government borrowing hit its highest level in five years, putting further strain on Finance Minister Rachel Reeves ahead of next week's Budget.
The Office for National Statistics said public sector net borrowing reached £20.2bn in September, £1.6bn higher than a year earlier but slightly below expectations of £20.8bn.
Borrowing for the financial year to date stood at nearly £100 billion - the second-highest on record and £7.2bn above the Office for Budget Responsibility's March forecast.
ONS chief economist Grant Fitzner said rising debt-interest costs, public service spending and benefits payments outweighed higher tax receipts, adding that the first half of the fiscal year had produced the largest deficit since 2020.
Mould said the figures did little to shake bond markets.
"There was only a mild reaction to the latest public sector finance figures on the bond market.
"Markets already know that Rachel Reeves must act fast to get public finances in a better shape, and a lot is riding on next month's Budget for solutions."
Patrick Munnelly, TickMill market strategy partner, said the scale of the borrowing challenge added to the fiscal pressure on the new government.
"The UK reported record-high borrowing levels for the April to September period, excluding the peak of the coronavirus pandemic.
"This development intensifies pressure on finance minister Rachel Reeves as she prepares to unveil next month's budget," he said, adding that Reeves's fiscal plans were coming amid expectations that inflation would remain among the highest in the developed world.
"Adding to economic concerns, the UK is set to release its inflation report on Wednesday, with September's inflation rate expected to hit 4%," he noted.
Markets also digested comments from Bank of England Governor Andrew Bailey, who cautioned that recent failures of two US private-credit-linked firms - car parts maker First Brands and subprime auto lender Tricolor - could signal deeper risks within the global financial system.
Bailey likened the collapses to early warning signs seen before the 2008 crisis, when complex loan packaging helped trigger a banking collapse.
"We certainly are beginning to see what used to be called slicing and dicing and tranching of loan structures going on, and if you were involved before the financial crisis then alarm bells start going off at that point," he told the House of Lords Financial Services Regulation Committee.
Bailey said the BoE would run a "stress test" of the private credit and equity sectors within the next year to assess potential vulnerabilities.
Deputy governor Sarah Breeden added that recent US bankruptcies highlighted the sector's "opacity, leverage and weak underwriting standards", warning that parallels with the global financial crisis could not be dismissed.
Edenred surges, Segro rallies, precious-metals miners tumble
In equities, French employee-benefits group Edenred surged 19.64% after reporting stronger-than-expected third-quarter sales.
In London, warehousing group Segro rose strongly after investors responded positively to its update highlighting an expanding data-centre pipeline.
Mould said, "Segro caught the market's attention with talk of a growing data centre pipeline.
"Investors are constantly looking for new ways to play the AI theme, having become well-versed with opportunities among semiconductor companies."
Munnelly added that "the company attributes this boost to improved occupier sentiment, which led to £22min new rent agreements during Q3."
Melrose Industries climbed 4.72% after GE Aerospace raised its annual profit forecast, benefiting the British engineering group, which supplies jet components.
Banking stocks also supported gains.
"London's FTSE 100 initially climbed for a second straight day on Tuesday, driven by gains in warehousing group Segro and banking giant HSBC," Munnelly noted.
"HSBC advanced after appointing banking veteran and former NatWest executive David Lindberg as the CEO of its UK operations."
By contrast, precious-metals miners tumbled as gold and silver prices retreated from recent highs.
Fresnillo slumped 15.78%, Hochschild Mining fell 13.89%, and Endeavour Mining shed 11.36%.
Eurofins Scientific also slipped 2.19% after disappointing results.
"At least a short-term top is now in place in gold and silver," said Chris Beauchamp, chief market analyst at IG.
"The mania appears to have popped for the time being, and a temporary reckoning has arrived for Fresnillo too - having ridden the boom, the shares are suffering one of the worst days in their history."
Reporting by Josh White for Sharecast.com.
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