The week between 2025 and 2026 was characterized by low volumes, as is typical for the holiday season, but it wasn't devoid of interesting insights. While traders enjoyed a few days off, the markets nevertheless wrote important pages: new all-time highs in Europe, a year to remember for Wall Street despite the lack of a "Santa Claus Rally," and China closing out 2025 with record performances and continuing to surprise on the first day of trading in 2026. Let's take a look at what happened.
Europe: New Year, New Records
European markets started 2026 on a high note, with the Stoxx 600 hitting a new all-time high of 596.94 points in its first trading session, up 0.6%. This is the third consecutive week of gains for the pan-European index, which closed 2025 with its best performance since 2021.
The real star of the year was Piazza Affari : the FTSE MIB closed 2025 with an incredible +31.5%, its best performance since 1998 and second only to the Spanish Ibex in Europe. During the week under review, Milan confirmed its position as the continental leader with +1.03% on December 30th and a further +1.1% on December 31st.
The defense sector continued to drive the markets: stocks such as Rheinmetall, Saab, and Renk posted gains of between 2% and 3% in recent sessions, bringing their annual returns between 130% and 193%. This is no coincidence, considering the persistent geopolitical tensions and expectations of increased military spending across the region.
Fincantieri was named Italy's best blue chip in 2025 with an impressive performance of +138%, followed by Telecom Italia (+107%) and Banca Popolare di Sondrio (+104%). The Italian banking sector also benefited from new Golden Power rules, which could facilitate M&A transactions in the European Union.
Macroeconomic data painted a mixed picture: France surprised positively with a manufacturing PMI rising to 50.7 in December, the fastest growth in three years thanks to exports. Germany, on the other hand, confirmed the difficulties of its industrial sector with a PMI falling to 47, signaling a deepening manufacturing recession.
USA: A year to remember, but no Santa Claus Rally
Wall Street closed out 2025 with staggering numbers, although the final sessions of the year disappointed those hoping for the traditional end-of-year rally. The S&P 500 closed the year up 16.39%, the Nasdaq up an impressive 20.36%, and the Dow Jones up 12.97%. This marks the third consecutive year of double-digit gains, an event so rare that it has only occurred six times since 1940.
The week from December 29th to January 2nd was marked by four consecutive declines, which ended the so-called "Santa Claus Rally." On December 31st, the S&P 500 lost 0.74%, the Nasdaq 0.76%, and the Dow 303 points. Nothing dramatic considering the gains accumulated throughout the year, but it's still a sign of caution among investors.
"We see a market set to move in a range in 2026. There is a lot of optimism for next year, but we are a little more cautious."
The Fed's December minutes, released on December 30, revealed a split among policymakers over the decision to cut rates by a quarter of a point. Some members suggested that it would be appropriate to keep rates unchanged, fueling uncertainty about the direction of monetary policy in 2026. Most traders now expect the central bank to keep rates steady at its late-January meeting.
Artificial intelligence remains the dominant theme: Nvidia closed 2025 with a 39% gain, while Palantir and AMD posted 139% and 78% gains, respectively. On January 2, the first trading day of 2026, semiconductors shone, with Intel and Micron up 7% and 10%. However, AI software giants like Microsoft, Meta, and Amazon lost ground, driven by the debate over the actual sustainability of AI infrastructure investments.
Special mention for precious metals : gold recorded its best annual performance since 1979 with a +64%, while silver even doubled in value (+140%), driven by the dual demand from investors and industry (solar panels, electric vehicles, batteries).
China: The Dragon Roars Again
Chinese markets closed out 2025 on a high note and started 2026 even stronger. The Shanghai Composite closed the year with an 18.4% gain, its best performance since 2019, while the Shenzhen Component did even better with a 29.9% gain, its best result since 2020. The ChiNext , the tech startup index, dominated with an incredible 49.57%.
But the real fireworks came from Hong Kong : in the first session of 2026, the Hang Seng jumped 2.8% to 26,338 points, its biggest daily gain since May, driven by enthusiasm for the technology and AI sectors. The index closed 2025 up 27.77%, its best performance since 2017.
Year-end macroeconomic data contributed to optimism: the manufacturing PMI rose to 50.1 in December, returning to expansion territory for the first time since March and beating analysts' expectations. The non-manufacturing PMI also returned above 50, at 50.2. The Beijing government appears to have finally found the right recipe with its targeted stimulus.
The star of the day on January 2 was Baidu , which soared 9.4% after the announcement that its AI chip division, Kunlunxin, had filed for a Hong Kong listing. AI chipmaker Shanghai Biren Technology more than doubled its value on its first day on the stock market, marking its first IPO of 2026 with an explosive start.
President Xi Jinping has signaled more proactive macroeconomic policies for 2026, fueling expectations of further fiscal and monetary support. UBS analysts predict that A-share earnings could accelerate from 6% in 2025 to 8% in 2026, while JPMorgan recently raised its rating on Chinese equities to "overweight." Not everyone is convinced, however: Capital Economics warns that China could continue to struggle with overcapacity and deflation, with only partial improvements in domestic demand.
In summary
| Market | Performance 2025 | Week 29/12-02/01 | Outlook |
|---|---|---|---|
| Europe (Stoxx 600) | +17% (best since 2021) | New all-time highs | Positive |
| USA (S&P 500) | +16.39% | 4 sessions down | Cautious optimism |
| China (Shanghai) | +18.4% (best since 2019) | Rally on the first day of 2026 | Positive with stimuli |
| Hong Kong (Hang Seng) | +27.77% (best since 2017) | +2.8% on January 2nd | Very positive |
The past week confirms that 2025 has been an exceptional year for global markets, despite geopolitical tensions, monetary policy uncertainties, and tariff concerns. Europe has shown surprising resilience, the US has consolidated its dominance of AI as an investment theme, and China appears to have regained its path to growth thanks to government stimulus. 2026 begins with many unanswered questions, but one thing is certain: those who remained invested in 2025 can celebrate with satisfaction.
