European Equities Reach Record Highs as Markets Prepared for Year End

European equity markets achieved record highs during Tuesday’s trading session following a subdued performance across Asian markets, as investors assessed substantial gains heading towards the conclusion of the year. Precious metals markets demonstrated renewed stability after silver and gold retreated sharply from historic peaks, removing some excess from their remarkable rally.

The pan-European STOXX 600 benchmark index advanced to fresh highs as continental markets moved higher. US equity futures indicated a likely extension of the decline witnessed from the previous week’s elevated levels. Crude oil prices maintained overnight gains following Russian allegations that Ukraine had targeted President Vladimir Putin’s residence. Whilst Moscow offered no substantive evidence to support these claims, the development represents a potential complication for US-led peace negotiations.

Geopolitical tensions intensified further as President Donald Trump indicated potential support for additional military action against Iran. China commenced 10 hours of live-firing exercises in the vicinity of Taiwan on Tuesday, adding to regional security concerns.

Market liquidity remained constrained across most asset classes during the holiday-shortened week, amplifying volatile price movements in silver and other precious metals overnight. Silver reached a new record of approximately $84 per ounce before slumping 8.7% in its most significant single-day decline since August 2020, dragging gold and copper lower. The white metal recovered 2.5% on Tuesday to $74.1 per ounce and remained positioned for an extraordinary annual advance of 156%. Gold similarly gained 0.7% to $4,361 per ounce following a 4.4% overnight decline.

Tony Sycamore, analyst at IG in Sydney, attributed the initial upward gap in silver to a combination of stop losses, price action and panic buying, compounded by the Chicago Mercantile Exchange raising margin requirements. The momentum proved unsustainable as genuine buyers failed to materialise at elevated levels.

Sycamore observed that whilst precious metals had experienced a cooling period, the underlying trend may persist due to ongoing deficits, nation stockpiling and export restrictions. He questioned whether the generational bubble had concluded, suggesting the outcome remained uncertain.

Europe’s STOXX index advanced 0.39% to record highs. MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.1% and was positioned for an annual gain of 26.7%, its strongest performance since 2017. Japan’s Nikkei eased 0.1% but registered a 26% advance for the year. US stock futures traded flat to marginally lower.

Wall Street concluded Monday’s session lower as heavyweight technology stocks retreated from the previous week’s gains. Nevertheless, US equities appeared set to conclude 2025 near record highs, having registered double-digit gains throughout a turbulent year characterised by tariff disputes, central bank policy shifts and persistent geopolitical tensions.

In currency markets, the US dollar held steady ahead of the Federal Reserve’s December meeting minutes, which were anticipated to reveal a divided central bank uncertain about its policy trajectory for the coming year. The dollar index remained on course for an annual decline approaching 10%, representing its steepest fall in eight years.

The yen held at 155.85 per dollar, maintaining distance from the 158 to 160 range that could potentially trigger intervention from Japanese authorities. The euro traded at $1.1775, positioned for a substantial annual gain of 13.7%.

Rate reductions in the United States and expectations of additional cuts have weighed on the dollar whilst supporting Treasury markets, particularly at the short end of the curve. Two-year yields declined 1 basis point to 3.4586%, marking a fourth consecutive session of declines. For the year, yields fell almost 80 basis points. The 10-year yield was set for an annual decrease of 46 basis points.

Oil prices remained largely stable on Tuesday following overnight gains exceeding 2%. Brent crude futures held at $61.92 per barrel after advancing 2.1% on Monday, whilst US West Texas Intermediate crude slipped 0.1% to $58.01 per barrel.