Europe stocks hit another record close as banks, miners lead

Recasts with closing levels

By Ragini Mathur and Pranav Kashyap

Dec 30 (Reuters) - European stocks logged a second consecutive record close on Tuesday, lifted by banks and commodity-linked shares, although gains were capped by thin, year-end trading.

The pan-European STOXX 600 .STOXX rose 0.6% at 592.78, edging ever closer to the 600 points milestone.

Banks .SX7P jumped 1.3%, while aerospace and defence .SXPARO gained 1.4%.

The defence index has scored a run of record highs this year and, despite easing back since October, is still on course for its biggest annual gain since 1996, buoyed by pledges of higher defence spending across Europe.

Basic resources .SXPP led the STOXX 600 higher, up 1.7%, as silver and gold steadied after a sharp retreat from record highs. GOL/

Energy .SXEP added 0.7%. Oil prices climbed more than 2% in the prior session after Russia accused Ukraine of attacking President Vladimir Putin's residence, while investors looked for clearer signals on Ukraine peace talks.

All STOXX 600 sub-indexes were in the green, with Technology .SX8P rising 0.7%.

Moves across major regional markets were higher, with the benchmark index in London .FTSE up 0.7% and Germany's .GDAXI up 0.6%.

As 2025 draws to a close, the index is on track for its strongest annual performance since 2021, bolstered by a combination of declining interest rates, Germany's commitment to fiscal expansion, and investors diversifying away from premium-valued U.S. technology stocks.

"Investors have been looking beyond the usual suspects for value and diversification ... and the world continued to be beset with geopolitical turmoil and fears of an AI bubble," said Danni Hewson, head of financial analysis at AJ Bell.

Many European exchanges will be shut on Wednesday, while others, including London and Paris, will run shortened sessions ahead of the New Year holiday.

With the week compressed by holidays, trading is expected to stay light. Sparse corporate updates and a thin calendar of catalysts leave investors leaning more heavily than usual on the U.S. Federal Reserve's December meeting minutes, due later in the day.

"The current market mood is very strong and positive for European equities, and we expect more of the same strong performance in 2026, particularly for defence stocks and European banks," said Kathleen Brooks, research director at XTB.

Among individual stocks, Fresnillo FRES.L climbed 6.8%, topping the benchmark index after Citi analysts raised their target price for the stock while maintaining a buy rating.

Airbus AIR.PA rose 1.5% after Air China 601111.SS s igned an agreement with the planemaker to purchase 60 A320NEO jets in a deal worth around $9.5 billion at list prices.

(Reporting by Ragini Mathur in Bengaluru; Editing by Rashmi Aich, Harikrishnan Nair and Louise Heavens)

((Ragini.Mathur@thomsonreuters.com;))