Europe close: Defence names lead gains as oil prices rebound
By Josh White
Date: Monday 05 Jan 2026
(Sharecast News) - European markets pushed to fresh intraday highs at the open on Monday as investors digested the implications of the US government's effective takeover of Venezuela following the extraordinary rendition of president Nicolas Maduro.
The pan-European Stoxx 600 rose 0.93% to 601.71, with gains led by Germany's DAX, up 1.29% at 24,856.32.
London's FTSE 100 added 0.54% to 10,004.57, while France's CAC 40 managed late gains of 0.2% to 8,211.50.
Joshua Mahony, chief market analyst at Scope Markets, said "European markets have brushed aside any geopolitical concerns to move higher in early trade today," adding that events in Venezuela had reinforced investor conviction in defence stocks.
Commodity markets were also in focus after US president Donald Trump said America and its energy companies were now running the country holding the world's largest proven oil reserves.
Oil prices recovered from earlier losses, with Brent crude last up 1.79% at $61.84, as traders reassessed the balance between geopolitical risk and potential supply implications.
Mahony noted that "we have seen oil prices rise despite the prospect of a sharp rise in Venezuelan output," arguing that near-term disruptions could outweigh longer-term supply potential as "Trump effectively shutting down the shadow fleet trade routes" may curb exports to China, while rebuilding production capacity would "invariably take years given the crumbling infrastructure and lack of investment under Maduro."
Mortgage approvals slip in the UK in November
In economic news, UK mortgage approvals for house purchases slipped to 64,530 in November from 65,010 in October, according to the Bank of England's latest Money and Credit report.
Net borrowing of mortgage debt rose to £4.5bn in November after a decline to £4.2bn in October, while the effective interest rate on newly drawn mortgages increased for the first time since February last year to 4.20% from 4.17%.
The rate on the outstanding stock of mortgages edged up to 3.90% from 3.89%.
Consumer credit growth accelerated, with net borrowing rising to £2.1bn from £1.7bn, including £1bn through credit cards and £1.1bn through other forms such as personal loans and car finance.
Matt Swannell, chief economic advisor to the EY Item Club, said that despite the dip in approvals, activity remains elevated.
"Firm levels of activity reflect the improvement in mortgage affordability over the past couple of years, but the big gains are now behind us," he said.
Swannell added that slower pay growth and cautious guidance from the Monetary Policy Committee suggest limited scope for further falls in mortgage rates, with demand expected to plateau even as tight supply supports a gradual rise in house prices.
Defence stocks rally amid heightened global tensions
On the equities front, defence stocks rallied amid heightened global tensions, with Rheinmetall, Renk, Leonardo, BAE, Dassault and Saab all higher.
Mahony said the US operation in Venezuela had "served to highlight the ongoing case for defence stocks," warning that traders were increasingly focused on "the possibility of similar action elsewhere in the world" and the risk that Washington's stance could embolden other powers. He added that Trump's actions were "setting a dangerous precedent over the extent to which the world's largest nations need to respect their neighbour's sovereignty," increasing the risk of broader geopolitical instability.
Johnson Matthey jumped after Berenberg upgraded the stock to 'buy' from 'hold', citing its correlation with precious metal proxies and the potential for consensus earnings upgrades.
Gold miner Fresnillo also advanced as bullion prices climbed, after Citi lifted its price target to 3,900p from 3,000p and reiterated its 'buy' rating while raising earnings and cash flow estimates to reflect higher silver and gold prices.
Chris Beauchamp, chief market analyst at IG, said that "gold and silver continue to steal the limelight," noting that both metals were rebounding on "a combination of geopolitical worries over Venezuela and Greenland, and a revival of the momentum trade that was so powerful over the last months of 2025."
Mahony added that the latest escalation had reopened questions over global stability, with Trump's willingness to act unilaterally "opening us up to additional geopolitical tension and volatility," supporting renewed buying interest in precious metals.
Reporting by Josh White for Sharecast.com.
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