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European equities edged lower on Monday, struggling to extend gains after ending last week at record levels, as weakness across most sectors outweighed support from technology and commodity-linked stocks in a holiday-shortened trading session.
The pan-European STOXX 600 slipped 0.1% to 586.86 by 09:28 GMT. Major regional indices also traded in negative territory, with London’s FTSE down 0.4% and France’s CAC 40 lower by 0.2%, as investors adopted a cautious stance amid thinner liquidity.
Last week, the STOXX 600 gained more than 1%, buoyed by softer U.S. inflation data that strengthened expectations for additional Federal Reserve interest rate cuts. Sentiment was also supported after the European Central Bank kept policy rates unchanged and offered a more optimistic assessment of the euro zone’s economic outlook.
Market participants, however, warned that reduced trading volumes during the holiday period could amplify short-term volatility, even in the absence of major macroeconomic catalysts.
Sector Moves Mixed After Strong Run
Most sectors retreated following Friday’s robust rally, led by consumer staples, which carry heavy weight in the benchmark index. Shares in Nestlé edged lower, dragging the food and beverages sector to the bottom of the STOXX 600.
Banking stocks, which were among the strongest drivers of gains last week, inched up 0.1%. The sector has surged more than 65% so far this year, making it one of Europe’s top-performing segments. Analysts attribute the rally to an increase in merger-and-acquisition activity, a more accommodative regulatory environment, and relatively stable economic conditions across the region.
Defence and aerospace stocks fell 0.4%, retreating after rising more than 3% over the previous two sessions, as investors locked in recent gains.
In contrast, technology shares advanced 0.5%, rebounding after ending last week with a 0.9% decline. Commodity-linked sectors also outperformed, with mining stocks climbing 0.8%, supported by a sharp rally in metals. Gold surged past $4,400 an ounce for the first time, while copper prices hit a fresh record high, underpinning sentiment toward resource-heavy names.
Overall, European markets began the week on a subdued note, with investors balancing strong year-end momentum against the constraints of low liquidity and a lack of near-term catalysts.
