European markets regained momentum on Tuesday morning after several days of weakness and uncertainty. Major equity indexes across Europe opened slightly higher as Asian markets advanced and U.S. futures dipped.
By midday, Milan led with a 0.80% rise, driven by gains in UniCredit, Intesa Sanpaolo, Eni, and defence giant Leonardo. In Germany, defence stocks also strengthened, but not enough to lift the DAX, which slipped 0.13%. Shipbuilder TKMS surged 6.28% after debuting in Frankfurt at around €60 per share on Monday. Rheinmetall AG rose 0.48%, while BAE Systems in London fell 0.91%.
European defence leaders Airbus, Thales, and Leonardo reportedly finalised a satellite merger. Leonardo’s shares climbed 0.56%, while the others remained steady. In London, the FTSE 100 advanced 0.22%, supported by energy and banking stocks. Paris’ CAC 40 inched up 0.13%, and the STOXX 600 remained nearly unchanged.
Russ Mould of AJ Bell said optimism from Wall Street’s rally had spread to Asia and Europe. He noted that investors are watching “U.S. rate cuts, earnings season, and renewed U.S.-China trade talks.”
Gold Retreats as Oil Rises and Euro Weakens
Gold prices fell after reaching a record above $4,390 an ounce. By 11:45 CEST, the metal’s value had dropped nearly 2%. Despite the decline, gold remains up 60% since January, fuelled by strong safe-haven demand amid geopolitical risks, a weak dollar, and economic uncertainty. HSBC expects gold to climb further in 2026, potentially reaching $5,000.
Crude oil prices edged higher. U.S. benchmark crude traded at $57.62 a barrel, and Brent reached $60.99. The euro weakened slightly to $1.1633 from $1.1641.
Asian Markets Surge as Japan Welcomes New Leader
Asian markets extended gains after Japan’s conservative lawmaker Sanae Takaichi became the country’s first female prime minister. Investors cheered her victory as Japan’s main index moved closer to the symbolic 50,000 mark.
The U.S. dollar strengthened to 151.31 yen from 150.75 yen. Analysts expect a weaker yen to persist if Takaichi pressures the Bank of Japan to slow interest rate hikes, a stance that could complicate inflation control.
Hong Kong’s Hang Seng gained 0.65%, and the Shanghai Composite rose 1.36%.
Investors Focus on Trade Talks and Earnings Reports
Hopes for a meeting between U.S. President Donald Trump and Chinese President Xi Jinping lifted sentiment. Investors anticipate progress in trade relations during a regional summit later this month.
Chinese Communist Party leaders also began discussions to set a five-year economic roadmap. Meanwhile, Wall Street traders are watching key corporate earnings: Coca-Cola reports Tuesday, Tesla on Wednesday, and Procter & Gamble on Friday.
Markets expect strong profits to justify recent stock rallies. The S&P 500 has surged 35% since April, raising concerns that valuations may have overheated. Corporate reports now serve as crucial indicators of U.S. economic strength amid the ongoing government shutdown, which has delayed major data releases.
The Federal Reserve faces growing pressure to balance inflation and employment. Officials signalled more rate cuts to support growth, though many warn this could fuel higher inflation.
The government plans to release delayed September inflation data on Friday. The report, vital for Social Security adjustments, remains one of the few updates scheduled until federal operations fully resume.
