^{Photo: The Wall Street Journal}

European markets opened the week on a cautious note Monday, with major indices holding steady after a powerful rally that pushed several benchmarks to record levels last week. Investors are taking a breather, eyeing new economic data and global developments that could shape the region’s next move.

A Quiet Start After a Strong Rally

After five consecutive sessions of gains, the pan-European Stoxx 600 ended Friday up 0.5%, notching its best weekly streak since early summer and hitting a record intraday high on Thursday. Markets in London, Frankfurt, Paris, and Milan were all poised to open near the flatline Monday, according to data from IG Group.

The FTSE 100 in London closed last week 0.7% higher, having set a fresh record earlier in the week. Germany’s DAX continued its upward trajectory, while France’s CAC 40 and Italy’s FTSE MIB added 0.5% and 0.4% respectively. Switzerland’s SMI also rose 0.6%, supported by gains in financials and healthcare stocks.

Investors Eye Data and Central Bank Clues

This week, attention turns to economic indicators that could influence monetary policy expectations. The U.K. Construction PMI and Eurozone Construction PMI are both due Monday, offering insight into regional business sentiment. Meanwhile, Spain’s industrial production report will shed light on how Europe’s fourth-largest economy is performing amid persistent inflation and slowing demand.

Market participants are also keeping an eye on central bank signals. The European Central Bank (ECB) has maintained its cautious stance, emphasizing the need for sustained progress in bringing inflation closer to its 2% target. Any indication of rate adjustments or changes in asset purchase policies could influence investor sentiment through the week.

Global Markets Show Mixed Momentum

Across the Atlantic, Wall Street ended last week on a high note despite ongoing political uncertainty and a partial government shutdown that has delayed key U.S. economic data, including the September jobs report. Futures trading on Sunday evening suggested U.S. indices would start the week little changed, reflecting investors’ wait-and-see approach.

In Asia, the mood was notably stronger. Japan’s Nikkei 225 surged over 4% overnight, reaching a new record after Sanae Takaichi was elected leader of the ruling Liberal Democratic Party—putting her on track to become Japan’s first female prime minister. The move boosted investor optimism about potential policy continuity and economic reforms.

Outlook for the Week

Analysts say the current consolidation phase in European equities may be short-lived if macro data continue to support a soft-landing narrative. Stronger-than-expected corporate earnings, easing inflation pressures, and signs of stabilization in manufacturing have all contributed to the recent rally.

“After such a strong run-up, it’s natural for markets to pause and reassess,” said one London-based strategist. “Investors are likely to focus on whether the momentum in growth and corporate profits can hold through the fourth quarter.”

As European markets hover near record territory, traders remain cautiously optimistic — balancing confidence in the region’s resilience with an awareness that global risks, from geopolitical tensions to delayed U.S. data, could still influence sentiment in the days ahead.