By Joao Manuel Vicente Mauricio and Ankika Biswas

(Reuters) –Bank shares steered Europe’s STOXX 600 index to a near one-month high on Tuesday, while investors kept a close watch on France’s political turmoil as the likelihood of the government’s collapse sent shockwaves through its markets.

The pan-European STOXX 600 rose 0.6% as of 0930 GMT, with shares of banks, luxury goods makers and miners rising over 1% each.

France’s stock and bond markets were briefly under pressure on Monday, with the benchmark CAC 40 stocks index, shrugging off losses and rising as much as 0.8% on the day before closing nearly flat.

France’s government faces an all but certain collapse on either Wednesday or Thursday after far-right and left-wing parties submitted no-confidence motions against Prime Minister Michel Barnier, who is facing strong opposition to his government’s budget.

“We’re in this little period now where it’s just sort of waiting to see what (political situation) this actually all means. What happens next is going to be the big question. What would a vote of no-confidence mean?” said City Index’s market strategist Fiona Cincotta.

Barnier will address television news programmes around 1900 GMT. Barring a last-minute surprise, this would be the first French government to be forced out by a no-confidence vote since 1962.

Europe’s stock market sentiment was somewhat upbeat on the day, likely boosted by Wall Street’s overnight record-breaking rally.

However, the CAC 40 has lagged its regional peers since mid 2024. Its German counterpart, DAX, has been the best-performing index in Europe even though the country is bracing for domestic elections while facing a bleak economic picture.

The euro-zone GDP, retail sales and PMI data, along with a high-priority U.S. employment print, are also likely to set the market tone going ahead through the course of the week.

ASML rose 2.5% as the chip company does not expect new U.S. restrictions on semiconductor exports to China to affect its most recent financial guidance. Exane BNP Paribas also re-initiated the stock’s coverage with an “outperform” rating.

Hugo Boss climbed 6% after UBS upgraded the German fashion house to “buy” from “neutral”, while EasyJet rose 4.3% after multiple brokerages raised their target price for the budget airline’s shares.

On the flip side, Covivio lost 3.8% after a Morgan Stanley rating downgrade to “underweight” from “equal-weight”.

Mercedes-Benz dropped 2% after Barclays cut its rating on the German carmaker’s shares to “underweight” from “equal-weight”.

(Reporting by Joao Manuel Mauricio in Gdansk and Ankika Biswas in Bengaluru; Editing by Savio D’Souza and Anil D’Silva)