European stocks hit fresh record close as tech, staples drive post-holiday gains

By Ragini Mathur and Pranav Kashyap

Dec 29 (Reuters) - European stocks kicked off post-holiday trading with a new record close on Monday, boosted by gains in technology and consumer-focused stocks although index gains were slim as defence and financial shares fell.

The pan-European STOXX 600 .STOXX finished 0.09% higher at 589.25.

Across the region, moves were slight, with France's CAC 40 .FCHI, Germany's DAX .GDAXI and Spain's IBEX .IBEX all closing marginally higher, while London's FTSE .FTSE ended flat.

Technology .SX8P, retail .SXRP and food and beverage .SX3P stocks gained but the defence-and-aerospace sector .SXPARO slid nearly 1% as investors continued to digest fresh signals from U.S.-Ukraine peace talks.

U.S. President Donald Trump said he and Ukraine's President Volodymyr Zelenskiy were "getting a lot closer" to a deal, yet the unresolved border issue kept nerves frayed, sending Leonardo LDOF.MI down 2% and pulling Rheinmetall RHMG.DE and Hensoldt HAGG.DE 1% lower.

Traders remained wary as Russia said Ukraine attempted an attack near Putin's residence in Russia's Novgorod region, a claim Moscow said could force it to reassess its negotiating stance.

Losses in financials also weighed. The sector, however 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," said Derren Nathan, head of equity research at Hargreaves Lansdown.

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 rose 4.6% after the radiopharmaceuticals equipment company said it had won a contract for its proton therapy system ProteusPlus in South Korea.