European stocks’ early-2026 rally hits speed bump as retail reality check drags

EUROPEAN stocks fell on Thursday, dragged down by a selloff in tech and disappointing updates from several heavyweight retailers, while weaker gold and copper prices weighed on broader market mood.

The retreat cools the early-2026 rally in the pan-European Stoxx 600, which notched a run of record highs out of the gate this year, underscoring that earnings season may be the next big test of investors’ appetite for risk.

The index fell 0.2 per cent to 603.83 points, logging its second consecutive day in the red. Technology stocks were the biggest drag on the index, falling 2.2 per cent

Retail stocks slipped 0.6 per cent, snapping a four-day winning streak, while miners fell 1.6 per cent as gold and copper prices eased.

The Stoxx aerospace and defence index, however, touched an all-time high after US President Donald Trump called for higher defence spending.

Elsewhere, Puma jumped 8.5 per cent after a report said China’s Anta Sports Products has offered to buy 29 per cent of the sportswear firm from France’s Pinault family.

Disappointing earnings sour sentiment

UK retail stocks slid as fresh trading updates exposed a still-fragile consumer backdrop: shoppers are buying essentials, but thought twice about spending a lot on clothing and gifts over Christmas.

Shares of Associated British Foods fell 14 per cent to their lowest since April after the Primark owner flagged weaker annual profits.

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The downbeat mood spread to Greggs, which said consumer confidence remains subdued, sending its shares 6.5 per cent lower. Tesco slid 6.7 per cent after reporting third-quarter sales.

In contrast, Marks & Spencer bucked the trend, rising 5 per cent after reporting robust Christmas demand for its premium food range, even as fashion and homeware sales softened.

The moves come as investors gear up for the first earnings season of 2026, hunting for clues on whether retailers can navigate a tricky mix of inflation fatigue and shifting spending habits.

While Venezuela headlines continue to drip into markets, traders appear largely desensitized, though the steady stream of news has added a layer of unease, leaving some split between buying the dip and trimming risk.

“Investors are navigating a familiar mix of macro and geopolitical risks. Ongoing geopolitical tensions, fiscal uncertainty and policy noise have encouraged more defensive positioning, while the absence of a clear near-term catalyst has reduced conviction to chase markets higher,” said Daniela Hathorn, senior market analyst at Capital.com. REUTERS