A glimpse into the upcoming day in European and global markets by Tom Westbrook.
The positive momentum in European banking and defense stocks carried over to Tokyo, with shares in Mitsubishi Heavy Industries rising by 3% to trade close to all-time highs.
The main focus is on the anticipation of potential defense spending in the wake of a peace agreement.
European futures are marginally up, indicating an opening around the record highs seen on Monday, supported by the boost in the defense sector which elevated broader indexes, including the pan-European STOXX 600 and Germany's DAX. Arms manufacturers surged by 14%.
President Donald Trump has organized bilateral peace negotiations with Russia, set to commence later on Tuesday in Saudi Arabia. British Prime Minister Keir expressed willingness to deploy peacekeeping troops to Ukraine, while European leaders refrained from making a similar commitment during emergency talks in Paris on Monday.
The prospect of an end to hostilities has provided strong backing to the euro and European stocks, diverting some attention from tariffs and interest rates.
This development is likely to overshadow Germany's ZEW survey, British labor data, and secondary manufacturing figures scheduled for release in the U.S.
As widely anticipated, Australia's central bank has lowered interest rates for the first time since 2020. The bank's stance suggests a cautious approach to further cuts, lending some support to the Australian dollar while the stock market declined slightly.
Meanwhile, across the Tasman Sea, a 50 basis-point rate cut is anticipated for Wednesday, with expectations of over 100 bps of easing throughout the year.
In Hong Kong, morning trading saw shares hitting their highest levels since October, with tech stocks reaching a three-year peak following Monday's meeting between President Xi Jinping and business leaders.
Market attention will also be on earnings reports, with Chinese search giant Baidu due to report later on Tuesday, and Alibaba later in the week. Baidu's stock stabilized after a recent dip, which occurred when founder Robin Li was absent from a symposium in Beijing.
U.S. markets resume trading following a public holiday.
Key market-influencing events planned for Tuesday include economic indicators such as the German ZEW survey, UK labor data, and U.S. Empire Fed manufacturing data, along with earnings reports from Baidu and Intercontinental Hotels.