European stocks climb on merger enthusiasm despite French instability

European stock markets edged higher on September 9, 2025, buoyed by a wave of merger and acquisition activity that overshadowed the deepening political crisis in France. Investors largely shrugged off the fallout from Prime Minister François Bayrou's ousting, focusing instead on corporate deals that promise to reshape key industries and capitalize on global demand for critical minerals.

Mining merger sparks sector rally

The standout driver of the day's gains was the blockbuster announcement of a merger between Anglo American and Teck Resources, valued at approximately $53 billion. This all-stock, merger-of-equals transaction will create Anglo Teck Plc, positioning the new entity as one of the world's premier producers of copper and other essential metals vital for the energy transition. Copper prices have surged in recent years due to its role in electric vehicles, renewable energy infrastructure, and expanding data centers powered by AI technologies.

Under the terms of the deal, Anglo American shareholders will hold about 62.4% of the combined company, with Teck investors owning the remaining 37.6%. The agreement is structured as a zero-premium exchange, meaning no cash payout, and is expected to close within 12 to 18 months pending regulatory approvals. The merged firm will retain its primary listing on the London Stock Exchange while basing its headquarters in Vancouver, Canada, blending Anglo's diversified portfolio with Teck's strengths in steelmaking coal and zinc.

This move marks a strategic pivot for Anglo American, which fended off a hostile $49 billion takeover bid from rival BHP earlier in 2024. Analysts have praised the deal for enhancing the company's resilience amid volatile commodity markets. "This combination creates a global critical minerals champion, well-equipped to meet rising demand," noted executives from both firms in their joint statement. Shares in Anglo American jumped 6.8% in London trading, while Teck's shares, listed in Frankfurt, soared 12%, propelling the broader basic resources sector up by 1.5% across Europe.

The merger underscores a broader resurgence in mining M&A activity, the largest in over a decade, as companies consolidate to secure supply chains for green technologies. With global copper demand projected to double by 2035 according to industry forecasts, such deals are seen as timely bets on long-term growth.

French political turmoil persists amid fiscal pressures

In contrast to the corporate optimism, France grappled with escalating governmental chaos after Bayrou's government collapsed on September 8. The prime minister, appointed by President Emmanuel Macron just nine months ago, lost a confidence vote in the National Assembly by a decisive 364-194 margin. The vote was triggered by opposition to Bayrou's proposed €44 billion austerity package, which aimed to curb spending through measures like eliminating two public holidays and imposing a freeze on government outlays.

This marks the second such ouster in under a year, leaving Macron to select his fifth prime minister since taking office in 2017—highlighting the fragility of France's fragmented parliament following the 2024 snap elections. The Élysée Palace announced that a successor would be named "in the coming days," with speculation centering on technocratic figures or centrists who might navigate the divided legislature without triggering further instability.

France's fiscal woes amplified the crisis. National debt ballooned to €3.346 trillion by the first quarter of 2025, equivalent to 114% of GDP, making it the third-highest debt burden in the European Union. Interest payments alone are forecasted to exceed €100 billion annually by 2029, eclipsing spending on education and defense. The austerity push was partly a response to these pressures, but it alienated left-wing and far-right lawmakers, who united against the government.

Market jitters were more apparent in fixed income than equities: the yield spread on 10-year French bonds versus German bunds widened by 6 basis points to around 80 bps, signaling investor concerns over potential credit downgrades. Rating agency Fitch is set to review France's sovereign rating on September 12, with a possible cut from AA- looming if political gridlock delays budget reforms. Despite this, the CAC 40 index eked out a 0.3% advance, reflecting a degree of compartmentalization between politics and corporate performance.

Mixed gains across European bourses

Beyond mining, other sectors contributed to the modest uptick in European indices. The Stoxx Europe 600, a benchmark for the region's largest companies, rose 0.2% to a one-week high of 554 points in early trading, paring earlier gains but still closing positive. This resilience came amid expectations of a Federal Reserve interest rate cut later in the month, which could bolster global risk assets.

Banking stocks were another bright spot, as Italy's Monte dei Paschi di Siena rallied 4.1% after reportedly acquiring a significant stake in rival Mediobanca, which itself gained 4%. This transaction highlights ongoing consolidation in Europe's financial sector, potentially improving efficiency amid regulatory scrutiny.

Market observers attributed the day's tone to a supportive mix of corporate activity and monetary policy tailwinds. "Merger optimism and Fed rate cut prospects are providing a buffer against French uncertainties," said Marija Veitmane, senior multi-asset strategist at State Street Global Advisors. Broader economic data, including softer U.S. inflation readings, further eased recession fears, allowing equities to prioritize fundamentals over geopolitical noise.

As France searches for stable leadership, European markets appear to be betting on corporate innovation and global trends to sustain momentum. However, prolonged political paralysis could test this equilibrium, especially if it spills over into EU-wide fiscal debates or delays critical infrastructure investments.