- European defense stocks surge, leading markets to record highs.
- EU plans to relax budget rules to boost defense investments.
- Investors shift focus to European markets amid US inflation concerns.
- Gold prices rise as a hedge against economic uncertainties.
- Asian markets react positively to China’s pro-business signals.
European shares surged to record levels on Tuesday, fueled by a sharp rise in defense stocks. The STOXX 600 index jumped to an all-time high of 556.81 points, with the defense and aerospace sector gaining around 1%. This followed Monday’s 4.6% rally, driven by Europe’s push to ease military spending restrictions.
The European Commission, led by Ursula von der Leyen, plans to propose changes to budget rules. These changes would allow member states to boost defense spending in response to US pressure. Trump has urged Europe to strengthen its military capabilities. Von der Leyen suggested exempting defense expenditures from EU spending limits, similar to what was done during the COVID-19 crisis.
Investors are shifting funds to European markets to avoid US inflation risks caused by trade tariffs. Florian Ielpo, a portfolio manager at Lombard Odier Investment Managers, explained, “The idea is very simple: overvalued US tech and attractive value in Europe.”
Market Reactions and Economic Indicators
While European markets experienced gains, Wall Street’s S&P 500 index appeared poised for a subdued session as US markets reopened from a holiday break. This outlook follows a Federal Reserve official’s recommendation to delay interest rate cuts, amidst US inflation rates running above the Fed’s target.
In the commodities sector, spot gold prices increased by 0.6% to $2,914.75 per ounce, with US-traded gold futures for April delivery rising by 0.9% to $2,927.90 per ounce. This uptick is partly due to investment bank Goldman Sachs raising its year-end price forecast for gold to $3,100, as investors seek safe havens amid economic uncertainties.
Asian Markets and Currency Movements
Asian markets saw gains, with Japan’s Nikkei climbing 0.5%. Banking and defense stocks drove the rise. Chinese markets also moved up after President Xi Jinping met business leaders. This signaled a more business-friendly approach. Hong Kong’s Hang Seng index hit its highest level since October. The tech sector peaked in three years before some investors took profits.
In currency trading, the euro gained 0.2%, reaching $1.0455. Traders expect potential fiscal stimulus after Germany’s elections. The Japanese yen dipped slightly to 151.86 per dollar. However, strong economic growth data could lead to future rate hikes by the Bank of Japan. Meanwhile, the British pound hovered near $1.2597, staying just below a two-month high.
Investors kept a close watch on upcoming economic reports. The British market focused on employment and inflation data. Traders remained cautious but optimistic about policy changes. Overall, strong market trends and economic signals continued shaping investor sentiment.
Energy Sector Developments
OPEC+ is reportedly considering postponing the planned supply increases that were supposed to begin in April. This comes despite President Trump’s calls to lower oil prices. Brent crude rose slightly by 0.77%, reaching $75.82 per barrel.
Meanwhile, European markets are hitting record highs. A mix of higher defense spending, strategic policy shifts, and investor realignment has driven this surge. As geopolitical and economic policies change, market participants stay alert, looking for opportunities while navigating the global financial landscape.