European stocks slipped on Thursday, cooling the strong start to 2026 as losses in technology shares and disappointing updates from major retailers weighed on sentiment.

The pan-European STOXX 600 fell 0.2% to 603.83, marking its second straight decline after hitting record highs earlier this year. Technology stocks dropped 2.2%, the biggest drag on the index, while retail shares slid 0.6%, ending a four-day winning streak. Mining stocks fell 1.6% as gold and copper prices eased.

The pullback highlighted growing investor caution ahead of the first earnings season of 2026, with markets reassessing whether recent gains can be sustained.

Retail earnings disappoint

Weak trading updates from UK retailers underscored a fragile consumer backdrop. Shoppers continue to prioritize essentials while cutting back on discretionary spending.

  • Associated British Foods shares plunged 14% after the Primark owner warned of weaker annual profits.
  • Greggs fell 6.5%, citing subdued consumer confidence.
  • Tesco dropped 6.7% following its third-quarter sales update.

In contrast, Marks & Spencer rose 5%, supported by strong Christmas demand for premium food, even as fashion and homeware sales softened.

Defence stocks stand out

While most sectors struggled, aerospace and defence stocks hit record highs after US President Donald Trump called for higher defence spending, reinforcing expectations of sustained military investment.

Corporate and macro backdrop

Elsewhere, Puma shares jumped 8.5% after reports that China’s Anta Sports had offered to buy a 29% stake from France’s Pinault family.

Market participants remain cautious amid ongoing geopolitical headlines, softer commodity prices, and uncertainty over consumer demand. Analysts say investors are increasingly defensive, with limited appetite to chase markets higher until clearer earnings signals emerge.

Disclosure: This article does not represent investment advice. The content and materials featured on this page are for educational purposes only.

Related: Wall Street Mixed as Tech Falls and Defense Stocks Jump