FTSE 100 edges higher as European markets rally on luxury and tech gains

​​​FTSE 100 climbs but lags European peers

​The FTSE 100 edged higher during Wednesday's session, riding the coattails of a broader European rally. However, the UK's blue-chip index struggled to match the pace set by its continental counterparts, hampered by its relatively light exposure to luxury goods and technology stocks.

​France's CAC 40 led the charge across European bourses, buoyed by stellar results from luxury giant LVMH. The French index's composition, heavy with premium consumer goods companies, allowed it to capitalise fully on signs of improving demand from China and resilient spending in developed markets.

​Germany's DAX 40 also outpaced London, benefiting from strength in its technology constituents. The divergence highlights the structural differences between European indices, with the FTSE's tilt towards miners, oils and financials leaving it vulnerable when these sectors lack clear catalysts.

​Despite the relative underperformance, the FTSE's advance demonstrates the risk-on sentiment sweeping across European markets. Investors appeared more willing to deploy capital into equities, supported by easing concerns about interest rates and tentative optimism about corporate earnings.

​Luxury stocks drive French market higher

​LVMH's better-than-expected sales figures provided the spark for a rally across Europe's luxury sector. The company's results suggested that fears about weakening Chinese demand may have been overdone, with the world's largest luxury goods maker reporting resilient performance in key markets.

​The positive sentiment quickly spread to rivals. Hermes, Kering and Richemont all posted gains as investors reassessed the sector's prospects. The luxury goods space has been under pressure for months amid concerns about China's property market troubles and their impact on high-end consumption.

​This sectoral strength proved particularly beneficial for France, where luxury companies command significant weightings in the CAC 40. The concentration of these premium brands in Paris gave French equities a distinct advantage over London, where no equivalent sector exposure exists.

​For UK investors, the luxury rally had knock-on effects. Burberry shares jumped as traders applied the positive read-across from LVMH's numbers, suggesting that even companies facing company-specific challenges could benefit from an improving sector backdrop.

​Tech rally boosts continental indices

​European technology stocks advanced following encouraging news from ASML, the Dutch semiconductor equipment manufacturer. The company beat expectations on both orders and guidance, providing reassurance about demand for its crucial chip-making tools.

​ASML's results helped drive a broader tech bid across European markets. The sector has been volatile in recent months, buffeted by concerns about the health of the semiconductor cycle and the sustainability of artificial intelligence-related investment.

​The technology tailwind proved more beneficial for continental European indices than for London. The FTSE 100 has limited exposure to pure-play tech companies, with its technology representation coming mainly through companies with diverse operations rather than focused semiconductor or software firms.

​UK gilt yields fall on rate cut speculation

​UK government bond yields dropped to their lowest levels since August as traders increased bets on Bank of England (BoE) interest rate cuts. The move in gilts reflected growing confidence that policymakers will need to ease monetary policy sooner than previously anticipated.

​Several factors contributed to the shift in rate expectations. Recent labour market data has shown signs of softening, with unemployment edging higher and wage growth beginning to moderate. These developments suggest the tight conditions that prompted aggressive rate hikes may finally be loosening.

​The International Monetary Fund (IMF) added fuel to dovish speculation with optimistic commentary about the UK economy. Meanwhile, cautious remarks from BoE officials reinforced the view that the central bank is monitoring data closely and stands ready to adjust policy if conditions warrant.

​Markets moved closer to fully pricing in a rate cut by February. This timeline represents a significant shift from earlier expectations and reflects the accumulating evidence that inflationary pressures are easing more quickly than many forecasters had anticipated.

​British Land and Burberry lead UK stock movers

​British Land shares rose after the property company highlighted strong demand for London office space driven by artificial intelligence (AI) companies. The landlord also reported near-full occupancy at its retail parks, suggesting that brick-and-mortar retail remains resilient despite the growth of online shopping.

​The positive update from British Land offered a counterpoint to the prevailing narrative about commercial property struggles. While some segments of the market face challenges from hybrid working and changing retail patterns, quality assets in prime locations continue to attract tenant demand.

​Burberry jumped following LVMH's sales beat, with investors betting that improving conditions in China could benefit the British luxury brand. The company has faced company-specific headwinds, but the sector-wide momentum may provide some respite.

​Elsewhere in the market, Pets at Home and CVS advanced after the Competition and Markets Authority proposed benign remedies for their proposed merger. The regulator's relatively light-touch approach removed a significant overhang for both stocks.

​Entain slipped despite reiterating its guidance, while recruiters PageGroup and Jupiter traded higher on steady updates. The mixed performance among individual stocks reflected the ongoing challenge of navigating a market where company-specific factors matter as much as broader trends.