European stock markets rallied on Wednesday, with equities in France perfomring strongly despite ongoing political upheaval in the country.

The pan-European Stoxx 600 index climbed 0.8%, while the DAX in Germany increased by 1%, and the FTSE 100 in the United Kingdom gained 0.7%. Sectors like industrials, basic resources, banks, and insurance outperformed.

France's CAC 40, meanwhile, moved up 1.1%. The index has been volatile throughout the week, fueled by the surprise resignation of Prime Minister Sebastien Lecornu on Monday. The outgoing Lecornu, who is holding last-minute talks over forming a new government, is set to report back to French President Emmanuel Macron later today about any possible breakthrough.

Still, the turmoil in Europe's second-largest economy has not gone unnoticed by investors, who are particularly attempting to gauge the path ahead for France's large budget deficit.

Edouard Philippe, Macron's first premier in 2017, urged the president to leave his position in "an orderly manner" to help resolve the crisis. But Lecornu has said a deal may be reached on France's budget by the end of the year, which could in turn make a snap election less likely.

Beyond France, the European automotive sector slipped after German luxury carmaker BMW slashed its 2025 earnings forecast, citing shifting U.S. tariff policies and tepid growth in the all-important Chinese vehicle market. The broader autos index dropped by 1.6%.

Regional semiconductor giants like ASML and ASMI also fell, dragged down by a call from some U.S. lawmakers for a wider ban by Washington and its allies on chipmaking equipment to China. A bipartisan investigation found that inconsistencies within rules in the U.S., Japan and the Netherlands allowed non-American chip gear manufactures to sell to some Chinese business that U.S. firms could not.

Source: trading Economi