German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, September 26, 2025. REUTERS/staff

By Shashwat Chauhan and Amir Orusov

(Reuters) -European shares inched lower on Tuesday as losses in healthcare stocks weighed and French stocks remained under pressure following Monday's political turmoil, though gains in energy and luxury giants helped limit losses.

The pan-European STOXX 600 inched 0.1% lower by 0848 GMT, coming off its record highs hit in the previous session.

French blue-chips slipped 0.1%, extending losses after Monday's sharp fall following Prime Minister Sebastien Lecornu's sudden resignation.

The outgoing PM is starting two days of last-ditch talks with members of various parties. Analysts were focused on the 2026 budget, which could be disrupted amid the turmoil.

"For financial markets, what really matters is the budget and how that's going to play out," said Anthi Tsouvali, multi asset strategist at UBS Global Wealth Management's Chief Investment Office.

"It's a situation where we might not have a government for a while and it will create a lot of volatility."

French stocks have been lagging the rest of Europe so far this year, with the index up about 8% for the year compared to double-digit gains for most peers.

On Tuesday, heavyweight healthcare stocks were among the biggest drags in Europe, down 0.6% as Denmark's Novo Nordisk lost 2% after a U.S. court rejected its challenge to Medicare's drug price negotiation program.

Germany's Bayer fell 3.9%, with traders pointing to a Goldman Sachs note that said it expects third quarter earnings to come below estimates.

Languishing at the bottom of the STOXX 600 was B&M, which dropped 8.6% after the discount retailer forecast a 28% plunge in first-half core earnings and lower annual profit.

On the bright side, oil and gas got a boost with a 1.5% gain in Shell after the energy major flagged higher LNG production and better gas trading results for the third quarter.

Morgan Stanley upgraded its rating on luxury giants LVMH and Kering to "overweight" from "equal weight", sending their shares up 2.2% and 4.4%, respectively.

On the economic data side, British house prices rose by a slower-than-expected 1.3% in the 12 months to September, while German industrial orders fell for a fourth straight month in August.

Back to stocks, Denmark's NKT gained 5.7% after Jefferies upgraded its rating on the cable manufacturer to "buy" from "hold".

Jefferies downgraded French cable maker Nexans to "hold" from "buy", sending its shares down 3.2%.

(Reporting by Shashwat Chauhan in Bengaluru and Amir Orusov in Gdansk; Editing by Harikrishnan Nair and Mrigank Dhaniwala)