European stock futures reached record levels on Tuesday, driven by soaring defence stocks amid expectations of increased military spending. Meanwhile, Hong Kong’s Hang Seng Index approached a three-year high following a rare meeting between Chinese President Xi Jinping and business leaders.
Global Markets Rally on Defence Spending and Optimism
European futures climbed 0.1%, while S&P 500 futures edged up 0.2%. Japan’s Nikkei rose 0.5%, tracking gains in European defence and banking stocks. The STOXX 600 index closed 0.5% higher on Monday, with aerospace and defence stocks surging 4.6% to all-time highs. Analysts predict a continued boom in the defence sector as global military budgets expand in response to evolving security threats, a trend being called a “supercycle.”
Hopes for a resolution to the Ukraine conflict also lifted European sentiment. French President Emmanuel Macron hosted an emergency summit on Ukraine, while the U.K. signaled readiness to deploy peacekeeping troops. Talks between Russian and U.S. officials are set to take place in Saudi Arabia, though Ukrainian President Volodymyr Zelenskiy insisted his country must be included in any peace deliberations.
Hong Kong Stocks Surge After Xi’s Business Meeting
Chinese markets saw a boost after Xi Jinping’s meeting with business leaders, signaling potential policy support. The Hang Seng Index jumped 1.8%, led by tech stocks, nearing its highest level since October. However, shares of Baidu remained under pressure after its founder was absent from the meeting. Alibaba is set to report earnings later this week.
Meanwhile, Australian stocks found support after the Reserve Bank of Australia (RBA) began its expected rate cut cycle, though the central bank signaled caution on further easing. The Australian dollar held firm at $0.6350.
Trade Tensions Ease, But Risks Remain
While the immediate threat of U.S. reciprocal tariffs has been delayed until April, concerns persist over potential levies tied to value-added taxes in other countries. The European Commission is reportedly considering strict import limits on certain food products, aligning with U.S. President Donald Trump’s trade stance.
Currency and Commodity Market Highlights
Euro: Hovered below $1.05 ahead of key European data and German elections.
Japanese Yen: Held steady at 151.74 as strong economic data increased the likelihood of a Bank of Japan rate hike.
British Pound: Traded at $1.2603, near a two-month high, as markets awaited employment and inflation data.
Gold: Pulled back to $2,895 per ounce after a seven-week rally.
Oil: Brent crude remained steady at $75.42 a barrel, as OPEC+ considered delaying planned supply increases despite Trump’s calls for lower prices.
With key economic data releases and geopolitical developments ahead, global markets remain focused on trade policy, interest rate trends, and political events shaping future growth.
