European markets recovered on Tuesday morning after weeks of weakness and uncertainty. Most major indexes opened slightly higher, following gains across Asia and small declines in U.S. futures.
By midday, Milan led European markets with a 0.80% rise, lifted by UniCredit, Intesa Sanpaolo, Eni, and Leonardo. Defence and energy stocks powered most of the momentum. Germany’s DAX slipped 0.13%, though defence stocks helped limit losses.
German submarine maker TKMS climbed 6.28% after debuting in Frankfurt on Monday at €60 per share. Rheinmetall gained 0.48%, while BAE Systems fell 0.91% in London.
Airbus, Thales, and Leonardo confirmed a satellite merger agreement, but only Leonardo’s shares reacted, up 0.56%. London’s FTSE 100 rose 0.22%, driven by bank and energy stocks, while Paris’ CAC 40 edged 0.13% higher. The STOXX 600 stayed nearly unchanged.
Russ Mould, investment director at AJ Bell, said optimism from Wall Street carried into Asia and Europe. “Markets now focus on U.S. rate cuts, earnings reports, and U.S.-China trade talks,” he explained.
Commodity Prices Shift as Gold Retreats
Gold prices dropped nearly 2% by late morning after reaching a record $4,390 an ounce. Traders locked in profits after months of safe-haven demand. The metal’s value has climbed 60% this year, fuelled by geopolitical uncertainty, a weak dollar, and economic instability.
HSBC predicted gold’s rally could continue into 2026, with prices possibly hitting $5,000 an ounce.
Crude oil prices moved slightly higher. U.S. benchmark crude traded at $57.62 per barrel, while Brent reached $60.99. The euro slipped to $1.1633 from $1.1641 against the U.S. dollar.
Asian Markets Rally After Japan’s Leadership Shift
Asian markets climbed as Japan’s Nikkei inched closer to the symbolic 50,000 mark. Investors reacted to conservative lawmaker Sanae Takaichi’s appointment as Japan’s first female prime minister.
The U.S. dollar strengthened to 151.31 yen from 150.75 yen. Analysts warned that Takaichi’s push to slow Bank of Japan rate hikes could weaken the yen further, making inflation control harder. Hong Kong’s Hang Seng rose 0.65%, and Shanghai’s Composite gained 1.36%.
In the U.S., futures dipped slightly after Monday’s rally. Investors expect President Donald Trump and President Xi Jinping to meet later this month at a regional summit, possibly easing trade tensions.
Investors Watch Earnings and Inflation Clues
Markets now turn to corporate results and U.S. inflation data for direction. Coca-Cola reports Tuesday, Tesla on Wednesday, and Procter & Gamble on Friday.
Investors want reassurance that profits justify this year’s 35% S&P 500 surge. Analysts worry stock prices have outpaced corporate earnings. With the U.S. government shutdown delaying key data, companies’ earnings serve as the clearest signal of economic strength.
The Federal Reserve faces pressure to balance inflation risks with slowing job growth. Officials suggest further rate cuts to support the economy, but cheaper borrowing could worsen inflation.
On Friday, the government will release delayed September inflation figures, which the Social Security Administration needs to calculate cost-of-living adjustments. Officials confirmed no other reports will be issued until normal operations resume.
