European shares were largely flat on Monday as trading resumed following the Christmas and Boxing Day holidays, with gains in basic resource firms offsetting declines in defense stocks. The pan-European STOXX 600 (.STOXX), opens new tab edged up 0.03% to 588.55 at 09:32 GMT, retreating from a record peak of 589.61 it reached earlier in the session.
Across the region, Germany's DAX (.GDAXI), opens new tab was down 0.2%, while Britain's FTSE 100 (.FTSE), opens new tab and France's CAC 40 (.FCHI), opens new tab were nearly flat.
Within the STOXX 600, the defence and aerospace sector (.SXPARO), opens new tab fell 1.3% after U.S. President Donald Trump and Ukraine's President Volodymyr Zelenskiy meeting on Ukraine peace terms.
Trump said he and Zelenskiy were "getting a lot closer" to a deal but that the territorial issue remains unsettled.
Leonardo (LDOF.MI), opens new tab fell 4.7%, while Rheinmetall (RHMG.DE), opens new tab and Hensoldt (HAGG.DE), opens new tab were both down 2.9%. Losses in industrial goods and services shares (.SXNP), opens new tab also weighed, as they fell 0.5%.
Banks (.SX7P), opens new tab were little changed on the day. The sector has been one of the market's strongest performers, gaining about 65% in 2025, with analysts citing increased merger-and-acquisition activity, a lighter regulatory environment and relatively stable economic conditions as key factors driving gains.
As the year draws to a close, the STOXX 600 is on track for its strongest annual performance since 2021, supported by declining interest rates, Germany's fiscal expenditure commitment and investors diversifying portfolios away from expensive U.S. tech stocks.
"2025 has been a year of two halves for equity investors. Overall, markets have held up well, but heading into 2026, global tensions and a mixed economic outlook mean there could be sharper share price swings next year," noted Derren Nathan, head of equity research at Hargreaves Lansdown.
On Monday, basic resources companies (.SXPP), opens new tab gained 1.1%, despite a pullback in metal prices. MET/ Retail (.SXRP), opens new tab and healthcare (.SXDP), opens new tab sectors also provided support to the broader market.
Investor focus in this holiday-shortened week will be on Tuesday's release of the minutes of the Federal Reserve's last meeting.
The U.S. central bank cut rates earlier this month and projected just one more cut for next year, while traders have priced in at least two more and anticipate the next Fed chair to lean dovish.
Among other movers, Ion Beam Applications (IBAB.BR), opens new tab rose more than 6% after the radiopharmaceuticals equipment company said it had won a contract for its proton therapy system ProteusPlus in South Korea.
