European Shares Steady Ahead of Trump's Inauguration amidst Financial Uncertainty

European shares hit a three-month high as banks and travel stocks gained, with investors eyeing Donald Trump's impending U.S. presidency. The STOXX 600 index rose 0.1%, as trading remained light due to a U.S. market holiday. Investors are wary of Trump's potential trade policies and their impact on inflation.

European shares reached a near three-month high on Monday, bolstered by gains in banking and travel stocks, as the market prepared for Donald Trump's inauguration as U.S. president.

The pan-European STOXX 600 index saw an increase of 0.1% by 0952 GMT, buoyed by last week's more than 2% rise. Trading volumes were lighter due to the closure of U.S. stock markets for Martin Luther King Day.

The anticipation surrounding Trump's inauguration at 12:00 pm ET (1700 GMT) is palpable among investors, particularly regarding his proposed executive actions on immigration, energy, and trade tariffs. Market analyst Ipek Ozkardeskaya indicates European equities are caught between global optimism and the uncertain impact of Trump's policies.

Despite investor anxiety regarding Trump's protectionist outlook, there is hope for a moderated approach during his term. The European banking index led sector gains with a 0.7% rise, though utility stocks fell by 1.1%, curbing broader market gains.

In economic news, German producer prices rose by 0.8% in December, missing expectations. ECB official Robert Holzmann raised concerns over potential rate cuts, which could harm the central bank's credibility amid rising inflation. The ECB is expected to lower rates by a quarter point at its upcoming meeting.

The World Economic Forum in Davos this week also garners attention from the political and business spheres. In corporate news, Hexagon shares rose after appointing Anders Svensson as CEO. Conversely, Siemens Energy faced declines, attributed to a downgrade from UBS. Meanwhile, Belimo Holding excelled as it surpassed revenue forecasts.

(With inputs from agencies.)