European equity markets closed above the record highs established in March, with strong pharmaceutical sector performance offsetting concerns about the economic impact of the U.S. government shutdown.

The pan-European Stoxx 600 index closed up 1.2%, while the Euro Stoxx 50 gained 0.9%. France's CAC 40 index climbed to its highest level since August 22.

Pharmaceutical companies including Roche Holding, Novartis, Novo Nordisk, and Sanofi emerged as the standout performers in European markets. Swiss generic and biosimilar drug manufacturer Sandoz Group AG declined 5.2%. JPMorgan analyst Richard Vosser noted that the sector received a boost after Pfizer successfully obtained an exemption from tariffs that former President Trump had long threatened to impose on the pharmaceutical industry, with expectations that European drugmakers will receive similar treatment.

European equity markets just delivered their best September performance in six years, buoyed by optimism surrounding U.S. economic growth resilience and interest rate cut expectations. Meanwhile, traders are closely monitoring the potential impact of the U.S. government shutdown on data releases.

"The U.S. government shutdown could have a slight contagion effect on European markets, but I don't think it will have a material impact," said Laurent Lamagnere, deputy chief executive of Alphavalue.

Seasonal trends suggest further upside potential in October. The Stoxx 600 index typically delivers its strongest performance in the fourth quarter.