Category: Market News

European banks are set to continue outperforming in 2026, supported by resilient macro conditions, strong internal capital generation and further valuation tailwinds, according to JPMorgan’s latest outlook on the sector.

The bank argues that lenders are operating in an unusually supportive environment, marked by firm GDP growth, subdued market volatility and a steady rate path from the European Central Bank — all of which underpin stable lending activity and healthy asset quality.

“We enter 2026 with a continued and reconfirmed positive view on European banks operating in a ’perfect’ environment,” supported by two key drivers, JPMorgan analysts led by Kian Abouhossein said.

Those drivers include an encouraging economic backdrop — improving GDP growth paired with stable rates, inflation and unemployment — and persistent bottom-up strength. JPMorgan expects pre-provision operating profits to rise 5.5% annually and earnings to grow 9.7% through 2027, helped by sustained share buybacks.

Valuation remains a central pillar of the bullish thesis. The sector trades at 8.9x expected 2027 earnings, a level the analysts consider compelling relative to projected 16.2% returns on tangible equity, which imply a cost of equity around 11%. They anticipate this falling toward 10% in 2026, creating “at least 12% upside over the next year.”

Over the medium term, JPMorgan expects the sector’s discount to the broader equity market to narrow further as fundamentals improve.

The note also highlights that banks are delivering positive operating leverage, keeping cost growth to 1.7% per year compared with 3.6% revenue growth. Capital buffers remain robust, with capacity to absorb roughly 268 basis points of provisions before profitability turns negative. Annual shareholder payouts — combining dividends and buybacks — are projected to stay near 8%.

In terms of stock selection, JPMorgan continues to prioritise valuation strength and capital resilience. Its Top Picks list still includes Barclays (LSE:BARC), NatWest (LSE:NWG), Deutsche Bank (TG:DBK) and Société Générale (EU:GLE), with Caixabank (TG:48CA), Standard Chartered (LSE:STAN) and Erste (TG:EBO) newly added to the preferred group.

Analysts said they “continue with our preference for European banks over U.S. banks,” even after Europe’s Stoxx 600 Banks Index has beaten the U.S. KBW Nasdaq Bank Index by 40% so far this year.

They argue that the current 17% two-year forward P/E discount relative to U.S. banks “is too high,” noting that such a gap is more typical of lower-quality U.S. regional lenders, while America’s largest money-center banks trade closer to 11.7x 2027 earnings.

Key risks cited include potential downside surprises on interest rates, political uncertainty in France, and intensifying competition for deposits.

LVMH (EU:MC) announced on Tuesday that Pietro Beccari, currently CEO of Louis Vuitton, will assume leadership of the group’s fashion division. Beginning January 1, Beccari will oversee the broader fashion portfolio while continuing in his existing role at Louis Vuitton, the company said in a statement.

The luxury conglomerate also confirmed that Sidney Toledano, chairman and CEO of LVMH Fashion Group, will step back from his operational duties.

Jefferies analysts expect Europe’s steel industry to stage a meaningful recovery in 2026 after hitting a low point in 2025, with hot-rolled coil (HRC) prices projected to reach about $750/t—more than $100/t above the third-quarter trough of $650/t.

According to the brokerage’s latest estimates:

• ArcelorMittal (EU:MT) is forecast to deliver €8.3 billion in EBITDA in 2026, slightly ahead of the €8.2 billion consensus.
• SSAB (TG:SKWC) is projected to generate SEK13.2 billion, marginally above the SEK13.1 billion consensus.
• Voestalpine (TG:VAS) is expected to post €1.7 billion, broadly in line with the €1.72 billion market expectation.

These figures represent a recovery from estimated 2025 EBITDA lows of €6.6 billion, SEK10.2 billion, and €1.5 billion respectively.

Drivers of the expected upturn

A major catalyst for the improvement is the European Commission’s October 7 proposal to:

• Cut steel import quotas by 50% to 18.3 million tonnes
• Double tariffs on steel imported above quota levels to 50% from 25%

The measures, due to take effect in July 2026, are forecast to reduce import market share from 25% to 15%, boost regional steel output by 10 million tonnes, and lift utilisation rates from 65–67% to a healthier 80–85%.

ArcelorMittal anticipates flat steel imports could fall by 8 million tonnes and long-steel imports by roughly 2 million tonnes.

Further tailwinds include:

• The Carbon Border Adjustment Mechanism (CBAM), launching January 2026, which is expected to add €40–70/t to the cost of imported steel
• Germany’s €500 billion infrastructure programme, forecast to generate 1–2% additional annual steel demand from 2027 onwards

Earnings sensitivity

Jefferies estimates that a €50/t price increase could expand 2026 EBITDA by:

• 20% for ArcelorMittal
• 13% for SSAB
• 15% for Voestalpine
• 57% for Salzgitter (TG:SZG)
• 24% for ThyssenKrupp (BIT:1TKA)

A 5% volume increase could add between 5% and 18%, with Salzgitter at the top end of that range.

Market snapshot

As of December 1:

• US HRC: $981.1/t
• European HRC: $712.7/t
• Chinese export HRC: $457/t

Iron ore traded at $90.6/t, while premium coking coal stood at $172.6/t.

ArcelorMittal has already raised its December delivery prices to €630/t, up from July’s €560/t low.

Valuation and sector positioning

Steel shares have enjoyed a strong rally in 2025:

• ArcelorMittal: +41.3% YTD
• SSAB: +50.7% YTD
• Salzgitter: +65.2% YTD
• Voestalpine: +58.5% YTD
  (vs. a 14% rise in the STOXX 600)

This re-rating has pushed sector valuation multiples from around 3.5x EV/EBITDA to roughly 5x, above the 10-year average of 4.5x. Jefferies cautions that with its 2026 estimates close to consensus, share prices already assume a mid-cycle recovery baked in by more than $100/t in price gains and 3–5% volume growth.

To see further upside at current levels, the broker argues that tangible EBITDA upgrades will be required. For 2026 positioning, Jefferies prefers SSAB among carbon steel producers and Acerinox (BIT:1ACX) in stainless steel.

BP (LSE:BP.) has scrapped its proposed H2Teesside hydrogen hub in northern England after a land-use conflict emerged with a rival development. The energy major withdrew its development consent order on Monday, following local authorities’ approval of a data centre to be built on the same former steelworks site.

In a statement, BP said: “Due to material changes in circumstances on the Teesworks site, including a planning application being granted locally for a data center on the same piece of land, we have taken the decision not to progress the development of H2Teesside and have withdrawn our development consent order application for the project.”

The move comes after delays in obtaining government approval for the hydrogen hub, while the competing data centre initiative gained momentum with local backing.

Endeavour Mining (LSE:EDV) announced plans on Tuesday to identify between 12 million and 15 million ounces of new mineral resources over the next five years. The gold producer, which trades in both London and Toronto, outlined a projected exploration budget of roughly $540 million for the period.

The company expects discovery costs to come in below $40 per ounce as it works to offset resource depletion and extend the operating lives of its key mines beyond its 10-year target horizon. Endeavour anticipates annual exploration spending to average more than $100 million across the 2026–2030 timeframe, underscoring its long-term commitment to organic growth through exploration.

Wizz Air Holdings Plc (LSE:WIZZ) reported an 8.6% year-on-year increase in passenger numbers for November, carrying 5.25 million travellers as it continued to expand capacity. The airline grew available seats by 9.5% to 5.79 million while maintaining a robust load factor of 90.7%, underscoring sustained demand across its network.

The carrier also celebrated the delivery of its 250th aircraft on 28 November, strengthening its position as one of Europe’s fastest-growing low-cost airlines. With more than 260 A321neo-family aircraft still on order, Wizz Air is positioned for substantial fleet and route expansion well into the next decade.

Operational continuity remained intact after the company implemented required software updates overnight on 28 November in response to a newly issued Airworthiness Directive (Ref #2025-0268-E).

Environmental performance continued to improve, with CO₂ emissions per passenger-kilometre falling 3.9% year-on-year to 49.5g—reinforcing Wizz Air’s standing as a sector leader in carbon efficiency.

For the twelve months to November 2025, the airline transported 67.8 million passengers, up 8.3% from the prior year, while its load factor increased by 0.8 percentage points to 91.1%. Wizz Air now operates a fleet of 252 Airbus A320 and A321 aircraft and was named Sustainable Airline of the Year 2025 at the Airline Economics Sustainability Awards Gala in September.

AstraZeneca (LSE:AZN) has announced that the US Food and Drug Administration has accepted its new drug application for baxdrostat and granted it priority review. The therapy is intended for adults whose hypertension remains inadequately controlled despite existing treatment options.

The FDA has assigned a Prescription Drug User Fee Act (PDUFA) decision date in the second quarter of 2026.

AstraZeneca’s filing is supported by data from the Phase III BaxHTN study, which showed a statistically significant and clinically meaningful reduction in systolic blood pressure among participating patients. Baxdrostat is being developed to provide a new option for individuals whose high blood pressure remains difficult to manage using currently available medications.

UK equities made modest gains on Tuesday morning, supported by a weaker pound and mixed trading across Europe. Fresh housing data from Nationwide also pointed to annual price growth in November, despite pressure from recent fiscal developments.

By 08:15 GMT, the FTSE 100 was up 0.04%, while sterling slipped 0.04% against the US dollar to 1.32. Germany’s DAX advanced 0.3%, whereas France’s CAC 40 traded broadly unchanged.

UK highlights

House prices continue to rise
Nationwide reported that UK house prices increased 1.8% year-on-year in November, suggesting the market remains resilient even after the latest Budget. The average home price reached £272,998, up 0.3% from October. However, annual growth slowed from October’s 2.4% reading.
The figures contrast with Rightmove data, which recorded a 1.8% month-on-month decline in asking prices and a 0.5% drop year-on-year—its weakest November performance since 2012.

OBR chair resigns after early Budget leak
Richard Hughes has stepped down as chair of the Office for Budget Responsibility following the inadvertent early publication of Chancellor Rachel Reeves’ Budget—released nearly an hour before its parliamentary unveiling. An oversight board review labelled the incident the most serious lapse since the OBR’s creation 15 years ago.

Bank of England eases capital rules
The Bank of England’s Financial Policy Committee reduced its capital buffer requirement for UK banks from 14% to 13% of risk-weighted assets. The move, outlined in the Bank’s latest Financial Stability in Focus report, aims to support lending to households and businesses.
The FPC cautioned that financial stability risks have risen in 2025 amid stretched global asset valuations, concerns around sovereign debt, and elevated risk in sectors such as AI-focused technology companies.

Corporate updates

discoverIE Group (LSE:DSCV)
Delivered record first-half profitability, with adjusted operating profit up 5% at constant exchange rates to £30.2 million. Revenue grew 3.5% at constant exchange rates to £216.4 million for the six months to 30 September.

Victrex (LSE:VCT)
Held its dividend steady as it described FY26 as a transition year. FY25 volumes rose 12% to 4,164 tonnes, while revenue reached £293 million, up 3% on a constant-currency basis.

Shaftesbury Capital (LSE:SHC)
Reported strong activity across its West End portfolio, achieving rent reviews 14% above previous passing rents and maintaining low gearing of 17%. The company completed 367 leasing deals so far this year, adding £30.2 million in annualised new rent.

On the Beach Group (LSE:OTB)
Announced record transaction value for the fourth straight year. Adjusted profit before tax increased 20% to £35 million for FY2025, with revenue up 6% to £121.4 million.

Wizz Air (LSE:WIZZ)
Carried 5.25 million passengers in November, an 8.6% rise year-on-year. Capacity expanded 9.5% to 5.79 million seats. The airline also marked the delivery of its 250th aircraft on 28 November.

Pantheon Resources (LSE:PANR) has issued an operational update on its Dubhe-1 well, confirming continued progress with clean-up activities and the start of oil production. The company reported total drilling and completion costs of roughly $33 million, a figure that includes the drilling of a pilot hole for core sampling and evaluation across several target horizons. Although the well came in at a higher cost than initially anticipated, management remains upbeat about the operational performance and the broader development potential. The newly constructed Dubhe pad is expected to enable additional future drilling, supporting Pantheon’s long-term field development plans.

Pantheon’s outlook continues to be shaped by meaningful operational challenges and financial pressures, including negative profitability and constrained cash flow. These factors remain the primary concerns for valuation. Even so, recent operational milestones and strategic developments introduce the possibility of future upside, contributing to a slightly more constructive view.

More about Pantheon Resources

Pantheon Resources plc is an AIM-listed exploration and development company focused on its 100%-owned Ahpun and Kodiak oil and gas projects on Alaska’s North Slope. The company holds substantial contingent recoverable resources—estimated at 1.6 billion barrels of ANS crude and 6.6 Tcf of associated natural gas—and aims to achieve market recognition of around $5 per barrel of recoverable resources by 2028. Its proximity to existing infrastructure provides key cost and logistical advantages as it advances toward commercial development.

CLS Holdings plc (LSE:CLI) has continued to make headway on its operational and strategic goals, reporting improvements in occupancy levels, progress on asset sales, and successful refinancing of debt maturing in 2025. Although economic and political uncertainty has weighed on leasing activity, the company has sustained stable transaction volumes and delivered ongoing rental growth. CLS has now completed more than half of its £400 million disposal programme, with additional sales expected in the near term, and has enhanced its balance sheet strength through the refinancing of £373 million of borrowings. The business also remains committed to sustainability, earning industry recognition for its initiatives, and is undergoing leadership renewal with several new board appointments.

The company’s outlook is tempered by financial pressures and prevailing bearish technical signals. A high dividend yield provides some support, but a negative P/E ratio and oversold market conditions underscore the risks. For CLS, further stabilisation of operations and meaningful improvements in profitability will be key to strengthening future performance.

More about CLS Holdings

CLS Holdings plc operates within the commercial real estate sector, specialising in the acquisition, development, and management of office properties. The company focuses on well-located, flexible assets in strong urban markets, with an emphasis on generating long-term value for shareholders through disciplined investment and active portfolio management.