European Market Gains in 2025 Amid Economic Shifts

European shares had their best year since 2021, buoyed by falling interest rates, Germany's fiscal boost, and strategic shifts away from U.S. tech. The STOXX 600 rose by 16.66%, while the S&P 500 increased by 17%. Banking and defence sectors were strong performers, whereas media struggled due to macroeconomic and AI disruptions.

European shares concluded 2025 with a slight decline, yet the market had its most robust performance since 2021. Declining interest rates, along with fiscal stimuli from Germany, underpinned the annual growth.

The pan-European STOXX 600 index dropped slightly by 0.1%, but posted a remarkable 16.66% increase for the year, closely mirroring the S&P 500's projected 17% rise. Banking and defence sectors substantially contributed to the upswing, with banks experiencing a 67% surge, their best since 1997 due to enhanced deal-making conditions and stable economic activity.

Conversely, the media sector faced a 15% decline amidst ad demand weakness and AI-related disruptions, despite J.P. Morgan's view that these challenges were overstated. Despite the day's downturn, Spain closed with a staggering near-50% gain, highlighting European diversity amid economic fluctuations.

(With inputs from agencies.)