SINGAPORE/LONDON, Jan 2 (Reuters) – European stocks began 2026 at fresh record highs as investors braced for a year set to test the AI-led rally, usher in a change of guard at the U.S. Federal Reserve, more government spending and potentially more turbulence under Donald Trump’s presidency.
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The STOXX index finished 2025 with its best showing since 2021 on the back of falling interest rates, Germany’s fiscal boost, and a rotation out of lofty U.S. tech names.
Asia, meanwhile, saw Hong Kong stocks kick off 2026 by climbing to a 1 1/2-month high, and markets in Taiwan, South Korea and Singapore hit record highs. Markets in Japan and China were closed.
Precious metals extended their runaway rally from last year, with spot gold up 1.6% to $4,384 an ounce, while spot silver jumped 4.3% to $74.37 per ounce.
Gold’s 2025 rise was its biggest in 46 years, while silver and platinum made their largest gains on record, driven by a cocktail of factors including the Fed’s rate cuts, geopolitical flashpoints, robust central bank buying, and ETF inflows.
Vishnu Varathan, Mizuho’s head of macro research for Asia ex-Japan, said the rally also underscored “hedges against entrenching USD debasement risks.”
S&P 500 futures rose 0.6%, while Nasdaq futures added 1%.
Stocks made strong gains in 2025 as markets weathered a year of tariff wars, the longest government shutdown in U.S. history, geopolitical strife as well as threats to central bank independence.
“The 2025 U.S. equity market rally has been fuelled by AI euphoria, robust corporate earnings, share buybacks and strong retail flows,” said Saira Malik, chief investment officer at Nuveen.
“Bouts of volatility, such as those sparked by macro, geopolitical and policy uncertainty, as well as periodic shifts in sentiment around AI, are likely to remain a feature of equity markets, meaning investors should expect more hiccups in the coming year.”
EYES ON THE FED
Much of investors’ attention this year will also be on the strength of the U.S. economy and the Fed’s policy path.
A slew of economic data delayed by the U.S. government shutdown is due in the coming days and could be key in determining how far rate cuts can go.
Traders have priced in a 15% chance that the U.S. central bank will ease rates this month, though they expect two more cuts this year.
The dollar was flat, with the euro down very slightly at $1.1735, while sterling gave up early gains to steady at $1.3456.
Brent crude futures were down 0.3% to $60.62 per barrel, while U.S. crude fell 0.4% to $57.20 a barrel. O/R/
Reporting by Rae Wee and Vidya Ranganathan; Editing by Shri Navaratnam, Thomas Derpinghaus and Kate Mayberry
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