European stocks surged to record levels in the first session of 2026, led by defence shares, as London’s FTSE 100 topped 10,000 points for the first time. Markets continued to build on last year’s strong gains amid thin trading volumes.

European shares start 2026 by hitting a record high

January 2, 2025

Reuters

German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, January 2, 2026. REUTERS

Reuters

European shares climbed to a fresh record high on Friday (January 2) in the first trading session of 2026, building on the previous year's stellar gains, with defence stocks leading the way.

By 0942 GMT, the pan-European STOXX 600 index rose 0.6% to 596.94, hovering close to the symbolically important 600-point milestone as investors returned from New Year celebrations. The index was poised for its third consecutive weekly gain.

The European benchmark finished 2025 with its best showing since 2021 on the back of falling interest rates, Germany's fiscal boost and a rotation out of U.S. tech names with lofty valuations.

Shares weathered a year of tariff turbulence, recovering from annual lows in April when U.S. President Donald Trump put blanket tariffs on trading partners, sending global markets wobbling.

On Friday, London's blue-chip FTSE 100 index hit the symbolic 10,000 points marker for the first time.

Bourses across the region were mostly higher, though trading volumes remained thin. The market in Switzerland was closed on the day and will resume trading from next week.

Production: Timm Reichert, Michele Sani/Reuters