European markets regained momentum on Tuesday after several weeks of weakness and uncertainty. Most equity indexes in Europe opened higher, following gains in Asia and a minor dip in US futures.
By midday, Milan’s stock exchange led the rebound with a 0.80% rise. Italian giants UniCredit, Intesa Sanpaolo, Eni, and Leonardo all posted gains. Defence shares supported Germany’s market, though the DAX index still slipped by 0.13%.
German shipbuilder TKMS outperformed again after debuting in Frankfurt on Monday at €60 per share. The stock climbed another 6.28% on Tuesday morning. Rheinmetall AG added 0.48%, while London’s BAE Systems declined by 0.91%.
Airbus, Thales, and Leonardo confirmed plans for a satellite merger. Only Leonardo’s shares reacted positively, up 0.56%. The FTSE 100 rose 0.22%, boosted by energy and bank stocks. Utilities also attracted buyers. Paris’ CAC 40 gained 0.13%, while the STOXX 600 remained nearly flat.
AJ Bell investment director Russ Mould said, “Wall Street’s strong session on Monday lifted confidence across Asia and Europe.” He added that investors now focus on US rate cuts, earnings season, and US-China trade discussions.
Commodities React to Geopolitical Tensions
Gold futures retreated after hitting a record above $4,390 an ounce. By 11:45 CEST, prices dropped nearly 2%. The metal has surged 60% this year, driven by safe-haven demand amid global uncertainty and a weakening US dollar.
HSBC analysts expect gold’s rally to continue through 2026, possibly reaching $5,000 per ounce. Crude oil prices edged slightly higher Tuesday morning, with US crude trading at $57.62 a barrel and Brent at $60.99.
The euro slipped to $1.1633 against the US dollar, down from $1.1641.
Global Markets Respond to Political Shifts in Asia and the US
US stock futures dipped slightly after Monday’s rally. In Asia, markets advanced following Japan’s political shift. Lawmakers elected conservative Sanae Takaichi as the nation’s first female prime minister, sending Japan’s benchmark index close to the symbolic 50,000 level.
The US dollar strengthened to 151.31 yen from 150.75. Analysts expect the yen to stay weak if Takaichi slows interest rate increases at the Bank of Japan. That stance could complicate efforts to control inflation, now above the bank’s 2% target.
Hong Kong’s Hang Seng gained 0.65%, while the Shanghai Composite added 1.36%.
Investors Eye US Earnings, Inflation, and Trade Talks
Expectations of a potential meeting between President Donald Trump and Chinese President Xi Jinping lifted optimism about easing trade tensions. Meanwhile, the Chinese Communist Party began discussions to outline its next five-year plan.
Investors are watching corporate earnings closely this week. Coca-Cola reports Tuesday, Tesla on Wednesday, and Procter & Gamble on Friday. Companies must show profit growth after the S&P 500’s 35% rally since April to justify high stock valuations.
Corporate results also serve as key indicators of US economic strength as the government shutdown delays official data. That delay complicates the Federal Reserve’s decision on rate cuts. Fed officials still signal multiple cuts ahead to stimulate growth, though that could risk reigniting inflation.
The US government plans to release September’s inflation update on Friday. The Social Security Administration will use the figures to calculate cost-of-living adjustments for beneficiaries. However, no further reports will appear until normal government operations resume.
