A graph of the German share price index DAX is displayed at the stock exchange in Frankfurt, Germany, November 25, 2025. REUTERS/Staff

By Anastasiia Kozlova and Purvi Agarwal

(Reuters) -European shares inched higher on Wednesday, supported by mounting expectations of U.S. rate cuts and signs of movement in Ukraine peace talks, while investors waited for the UK budget announcement.

The pan-European STOXX 600 rose 0.2% to 569.19 points by 0928 GMT, after posting its strongest daily gain in two weeks on Tuesday.

Major regional indexes also firmed, with Germany and France up 0.1% and 0.2%, respectively.

London's FTSE 100 added 0.1% ahead of the autumn budget, where Finance Minister Rachel Reeves is expected to outline tens of billions of pounds in tax increases.

"Further tax hikes are a foregone conclusion, some are as good as fully priced in by markets.... what investors will be really interested in is whether these tax measures will be both sufficient enough to achieve fiscal sustainability, while also limiting the hit to Britain's economy," said Matthew Ryan, head of market strategy at Ebury.

Banks were the biggest boosts to the benchmark European index, up 0.4%. Technology shares and miners gained 0.6% and 0.4%, respectively, leading broader gains.

European markets drew support from upbeat investor sentiment globally as expectations for another U.S. Federal Reserve rate cut in December grew following soft economic data on Tuesday.

Bloomberg News reported, citing people familiar with the matter, that White House economic adviser Kevin Hassett, who has called for lower interest rates, was widely viewed as the leading contender for the post of Fed chair.

U.S. Treasury Secretary Scott Bessent said there were good chances of President Donald Trump announcing his pick for the Fed chair before Christmas.

Progress on a Russia-Ukraine peace deal also buoyed sentiment after Ukrainian President Volodymyr Zelenskiy signalled readiness to push forward a U.S.-backed framework to end the war.

However, some uncertainty remained as Trump retracted the deadline for the deal, supporting oil prices and European defence stocks. The energy sector gained 0.4%, while the broader defence index was up 0.3%.

The STOXX 600, which saw its steepest weekly fall in over three months on Friday, is expected to put up a strong performance in 2026, with a Reuters poll indicating a 11% gain next year.

Among stocks, Novo Nordisk gained 1.1% after the U.S. Medicare health plan said that newly-negotiated prices for 15 of its costliest drugs will save 36% on those medications compared with recent annual spending.

Spain's HBX plunged as much as 13% after reporting a much wider full-year loss.

(Reporting by Anastasiia Kozlova in Gdansk and Purvi Agarwal in Bengaluru; Editing by Nivedita Bhattacharjee and Mrigank Dhaniwala)