German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, October 8, 2025. REUTERS/staff

By Shashwat Chauhan and Amir Orusov

(Reuters) -European shares came off record highs on Thursday, pulled down by banks after heavyweight HSBC dropped following its proposal to privatise Hong Kong's Hang Seng Bank, while focus remained on ongoing French political turmoil.

The pan-European STOXX 600 fell 0.3% to 572.2 points by 0851 GMT, coming off its record high hit in the last session. Local bourses were mixed but Germany's DAX inched 0.1% higher to an all-time high.

Shares of HSBC dropped 6.5%, the biggest drag on the STOXX, after the British lender said it plans to buy out minority shareholders in its Hang Seng Bank subsidiary in a deal worth around $13.6 billion.

"There are obviously concerns about the timing and the variation of the deal," said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank.

Lloyds Banking Group shed 3.6% after the lender said it would likely need to set aside more cash to cover the cost of compensating motor finance customers in a probe.

Auto stocks lost 0.5% with French tire maker Michelin off 4.6% after saying its third-quarter sales volumes would decline compared to the previous year.

Bucking the sombre mood, the basic resources sector, which includes Europe's leading miners, climbed 0.2%, tracking gains in copper and iron ore prices.

Travel and leisure rose 0.4%, with France's Sodexo up 2.6% after the food service provider announced the nomination of Thierry Delaporte as its new CEO.

EYES ON FRANCE

Investors are closely watching whether President Emmanuel Macron can appoint a new prime minister capable of guiding the country out of its deepening political deadlock.

French assets were rattled earlier this week after Sebastien Lecornu, France's fifth prime minister in two years, tendered his and his government's resignation just hours after announcing the cabinet line-up.

The regional blue-chip index is up for the third straight session on Thursday and has recovered all of its losses. Still, the benchmark remains one of the laggards in 2025, up about 9.2% compared to double-digit percent gains in other top nations.

On the macro front, minutes from the U.S. Federal Reserve's last policy meeting showed officials agreed that risks to the U.S. job market had increased enough to warrant an interest rate cut, but remained wary of high inflation.

Minutes from the European Central Bank's September meeting and comments from a slew of Fed officials including Chair Jerome Powell are due later in the day.

Back to stocks, Germany's Gerresheimer slumped 13.3% after the packaging and medical equipment maker cut its annual outlook.

EDP Renovaveis gained 2.7% after Jefferies upgraded its rating on the Portuguese wind energy producer to "buy" from "hold".

(Reporting by Shashwat Chauhan in Bengaluru and Amir Orusov in Gdansk; Editing by Sherry Jacob-Phillips and Mrigank Dhaniwala)