"Risk appetite has recovered as markets price in the prospect of lower interest rates in the U.S., potentially a Federal Reserve chair next year who has a more dovish stance," said Fiona Cincotta, senior market analyst at City Index. "There is a sense that the market is turning to a slightly more positive outlook, like the risk sentiment is improving." Technology stocks added 0.7%, with SAP rising 1.7% after J.P. Morgan backed the stock with an "overweight" rating.

UPDATE 2-Industrials, automakers drive European shares higher at close

European Shares Rise on Elevated US Rate Cut Expectations

European shares closed higher on Thursday, led by industrials and automakers, as global risk appetite improved on elevated US rate cut expectations.

Automakers led sectoral advances, climbing 2.2%, with Porsche and Mercedes-Benz adding 5.7% and 4.4% respectively.
Industrial stocks also rallied 1.4%, with Schneider Electric and Siemens Energy gaining 3.2% and 2.5%, respectively, after J.P.Morgan upgraded both companies' ratings.

Those moves supported regional indexes, with those in Germany and France up about 0.9% and 0.6%, respectively.

"There's finally a bit of good news for a sector that has struggled to make sustained headway in terms of real upside for quite some time... the loosening of regulation might just allow the sector a bit of breathing room," said IG Chief Market Analyst Chris Beauchamp.

Investors Confident on Impending Fed Rate Cut

The day's moves in the STOXX 600 were also driven by investor confidence that the US Federal Reserve will cut interest rates next week.

U.S. weekly jobless claims, which fell to their lowest in more than three years, did little to alter rate-cut expectations.
"Risk appetite has recovered as markets price in the prospect of lower interest rates in the US, potentially a Federal Reserve chair next year who has a more dovish stance," said Fiona Cincotta, senior market analyst at City Index.

Sector Highlights

Technology stocks added 0.7%, with SAP rising 1.7% after J.P. Morgan backed the stock with an "overweight" rating.
European semiconductor stocks also jumped on Thursday, with STMicroelectronics and Soitec advancing 3.4% and 2.7%, respectively.
Traders cited reports that Chinese chipmaker Cambricon planned to triple chip output to replace Nvidia in China's AI market, which boosted the sector's outlook.

Notable Downers

The heavyweight healthcare sector underperformed with a 0.6% decline.
Philips sank 5.6% after Citi flagged concerns about the medical technology company's 2026 growth expectations.

Other Stocks in Focus

Societe Generale gained 3.2% after Goldman Sachs upgraded the stock to "buy" from "neutral."
Shares of some spirit makers fell, with Remy Cointreau and Diageo down 2.1% and 3.9% respectively, after UBS downgraded its rating on the stocks.