Europe close: Stocks manage modest gains in thin holiday trading

(Sharecast News) - European shares edged modestly higher on Monday in subdued trade, with defence stocks under pressure after US president Donald Trump said a peace deal between Ukraine and Russia was "closer than ever," even as key territorial issues remained unresolved.

The pan-European Stoxx 600 added 0.11% to 589.35, with gains in Germany and France offset by a slight decline in the UK.

"The final trading week of 2025 has begun, and so far, there's not a Santa rally in sight," said Kathleen Brooks, research director at XTB, adding that markets were seeing a more defensive tone as investors pared risk into year end.

Germany's DAX rose 0.1% to 24,364.92 and France's CAC 40 also gained 0.1% to 8,112.02, while London's FTSE 100 slipped 0.04% to 9,866.53.

Sentiment was shaped by geopolitical developments after Trump held a two-hour meeting in Florida with Ukrainian president Volodymyr Zelenskyy, saying a draft agreement to end the war was nearly "95% done," though conceding the future of the Russian-occupied eastern Donbas region remained a major sticking point.

Russia continued to bomb civilian targets in Kyiv, but Kremlin spokesperson Dmitry Peskov said Moscow agreed with Trump's assertion that talks were in their final stage.

Zelenskyy said a draft peace framework envisaged US security guarantees for Ukraine for 15 years, compared with his request for 50.

With a shortened trading week ahead of the New Year break and no major economic data due, volumes remained thin, reinforcing what Brooks described as "a defensive air to markets as we move towards year end."

US pending home sales among the only global data point

In thin economic news, US pending home sales unexpectedly surged in November, according to the National Association of Realtors, reaching their highest level since February 2023.

Pending sales rose 3.3% month-on-month, beating expectations for a 1% increase and following October's upwardly revised 2.4% gain, while annual growth stood at 2.6%.

"Homebuyer momentum is building; the data shows the strongest performance of the year after accounting for seasonal factors, and the best performance in nearly three years, dating back to February 2023," said NAR chief economist Lawrence Yun.

He added that "improving housing affordability - driven by lower mortgage rates and wage growth rising faster than home prices - is helping buyers test the market," with greater inventory also supporting demand.

"Regionally, pending sales rose 3.3% in the South, with increases of 1.8% in the Northeast, 2.2% in the Midwest and 2.4% in the West.

Defence plays in the red, Fresnillo rises on silver sentiment

Among equity movers, European defence stocks fell despite the tentative peace signals.

Leonardo dropped 1.96%, Hensoldt fell 0.96%, Rheinmetall declined 1.14% and Saab slipped 1.04%.

In contrast, precious metals exposure supported miners, with Fresnillo rising 1.25% on higher gold and silver prices, although silver retreated sharply from record levels.

"Silver has rallied by 157% so far this year, it is by far the best performer in the commodity and equity index space in 2025," Brooks said.

"However, today's sharp retreat suggests that we have put in a medium-term high for the metal, and traders should brace themselves for a period of volatility as we move into 2026.

"While there is still a supply and demand imbalance in the precious metals sphere, it continues to hold that what goes up, and then up farther still, must come down."

Brooks also warned that "for now, technicals are driving precious metals and they are suggesting that gold and silver are overbought," with gold down 1.8% on the day and silver taking the brunt of the selling pressure, contributing to what she described as a broader "risk off tone" across markets as 2025 draws to a close.

Reporting by Josh White for Sharecast.com.