Europe close: Stocks manage small gains as investors look to Fed

26th Jan 2026 14:38

(Sharecast News) - European shares managed a positive close on Monday despite a choppy session, as worries about another potential US government shutdown and weak economic signals from Germany weighed on sentiment.

The pan-European Stoxx 600 ended up 0.2% at 609.57, with Germany's DAX rising 0.13% to 24,933.08, France's CAC 40 edging 0.15% lower to 8,131.15 and the UK's FTSE 100 gaining 0.05% to 10,148.85.

Safe-haven demand remained a dominant theme, with gold futures holding well above $5,100 an ounce as investors continued to seek protection amid political and geopolitical uncertainty.

As AJ Bell's Russ Mould noted, "there may not be any big geopolitical news to rival last week's Greenland drama, but internal tensions in the US are helping to keep precious metals prices elevated," adding that "gold has moved through $5,000 for the first time - showing investors are still seeking out the traditional haven for some insurance against what remains a febrile backdrop."

He highlighted that "in less than 18 months bullion has more than doubled in value - buoyed by central bank demand, global turmoil, dollar weakness, and the diminished appeal of other popular defensive assets."

Silver prices were also higher, having recently breached the $100-an-ounce mark for the first time.

Political uncertainty in Washington added to the cautious mood after Democrats signalled they would block a federal spending package, increasing the risk of a shutdown.

Mould said "the odds of another US government shutdown look to have increased as Democrats say they will block the federal spending package over the fallout from the Trump administration's immigration crackdown," reinforcing demand for defensive assets.

Currency markets were also unsettled, with Patrick Munnelly at TickMill noting that "the US dollar took a hit against most major currencies as concerns grew over potential American intervention in Japan's foreign exchange market, dampening sentiment toward the global reserve currency."

German business sentiment unchanged, UK private sector activity weakens

In economic news, a survey from the Ifo Institute showed German business sentiment was unchanged in January.

The business climate index held steady at 87.6, with the current situation index ticking up to 85.7 from 85.6, while expectations slipped to 89.5 from 89.7.

Manufacturing sentiment improved to -12.2 from -14.6, but services weakened to -2.6 from -2.1.

Trade and construction also showed modest improvement.

Ifo president Clemens Fuest said the German economy was starting the year "with little momentum."

Carsten Brzeski, global head of macro at ING, said the reading should be treated with caution given uncertainty over when responses were submitted relative to recent US tariff decisions, adding that the flat headline figure reflected renewed uncertainty from geopolitical tensions and tariff threats.

In the UK, a survey from the Confederation of British Industry showed private sector activity continued to weaken in the three months to January, with the growth indicator at -33, broadly unchanged from December's -34.

All sub-sectors reported falling activity, although expectations for the next three months improved to -20 from -30.

Alpesh Paleja, the CBI's deputy chief economist, said the UK economy had not enjoyed a strong start to 2026, warning that weak growth expectations were now being accompanied by rising price pressures at a time when inflation remained uncomfortably high.

Munnelly pointed to similar tensions in the latest PMI data, noting that while the UK composite rebounded to 53.9, "the employment index dropped further, indicating job losses, and rising input costs suggest inflation remains stubborn," adding that the divergence "complicates the MPC's plans, likely slowing the pace of rate cuts."

Global data offered some support, with US durable goods orders jumping 5.3% in November, rebounding from a revised 2.1% fall in October and beating expectations.

The increase was driven by a 14.7% surge in transportation equipment orders, including a 97.6% jump in civilian aircraft bookings, while gains elsewhere were more modest.

Munnelly said US markets had ended last week on an uneven footing, with "the S&P 500 marking its first back-to-back weekly decline since June," even as megacap stocks such as Nvidia rose and expectations firmed that the Federal Reserve would leave interest rates unchanged at its upcoming meeting.

Gold miners in the green, Danone falls on formula recall

On the corporate front, trading was relatively quiet as investors looked ahead to the Federal Reserve's first policy decision of the year on Wednesday, where rates were expected to be left unchanged but guidance would be closely watched.

Mould said that "this week is a crunch one across the Atlantic," with major US tech companies reporting and the Fed set to deliver its latest decision "amid swirling speculation over who will replace current chair Jerome Powell later this year."

In Europe, miners Fresnillo and Antofagasta advanced on the back of higher precious metal prices, with Mould noting that "the FTSE 100 was higher, lifted by its contingent of gold miners," while stocks with US exposure lagged.

On the downside, Danone shares fell after the food group recalled batches of infant formula globally due to traces of a toxin.

Airbus slipped after chief executive Guillaume Faury warned in a note seen by Reuters that 2026 had been marked by an "unprecedented number of crises."

Ryanair reversed earlier gains to close lower despite raising its full-year fare growth forecast to above 7% as revenues climbed 9%, with Mould observing that although profits had fallen, the airline "doesn't seem too worried," helped by lower oil prices and fuel hedging, adding that Ryanair "has form in riding out short bursts of turbulence."

Reporting by Josh White for Sharecast.com.