By Ragini Mathur and Purvi Agarwal
Dec 22 (Reuters) - European shares traded slightly lower on Monday as technology and commodity stocks offset declines elsewhere, while investors opened a holiday-shortened week on a tepid note after Friday's record close.
The pan-European STOXX 600 was down 0.1% at 586.86 at 0928 GMT. Major regional markets were lower, with the ones in London and France down 0.4 and 0.2% respectively.
The STOXX 600 gained over 1% last week after a slowdown in U.S. consumer price inflation
bolstered expectations for additional Federal Reserve rate cuts, while the European Central Bank maintained policy rates and took a more positive view of the euro zone economy.
Analysts expect some volatility in markets driven by low liquidity heading into a holiday-shortened trading week.
"Even if it's a quiet week on the calendar, we can’t completely dismiss the prospect of a final year-end curveball, which would be in keeping with the constant surprises of 2025 so far," said analysts at Deutsche Bank.
Most sectors retreated following Friday's robust gains, with consumer staples the biggest weights. Nestle weighed with a marginal decline, bringing the food and beverages sector at the bottom of the index.
Banks, which largely drove last week's gains, were up 0.1%. The sector is up more than 65% year-to-date—one of the market's strongest performers—with analysts pointing to a pickup in merger-and-acquisition activity, a lighter regulatory backdrop, and a relatively stable economic environment.
The defence and aerospace sector retreated 0.4% after rising over 3% in previous two sessions.
"We anticipate positive macroeconomic momentum in the Eurozone will persist, and corporate profit growth to pick up... we particularly like banks, utilities, industrials, technology and Germany," said analysts at UBS Global Wealth Management.
Tech advanced 0.5%, rebounding after closing the previous week with a 0.9% decline.
Commodity-linked sectors traded higher, with miners up 0.8% after gold prices raced past $4,400 for the first time and copper prices set a record high.
Oil firms gained 0.2% tracking a rise in oil prices.
STOXX 600 is poised to deliver its strongest annual performance since 2021, benefiting from declining interest rates and global investors diversifying their portfolios away from premium-valued U.S. technology stocks.
On the radar will be a U.S. GDP reading this week, one of the final economic indicators before the year ends.
Among stocks, Abivax jumped 7.6% after media reports of renewed chatter of U.S. pharma giant Eli Lilly attempting a takeover.
Telecom Italia fell 5% to the bottom of the index, following plans to convert costly savings shares into ordinary stock after a compensation windfall.
(Reporting by Ragini Mathur and Purvi Agarwal in Bengaluru; Editing by Harikrishnan Nair and Tasim Zahid)
