The euro rose by 0.4% against the dollar in early trading, outpacing other major currencies. This gain came as Eastern European leaders quickly offered support to Ukraine amid fears of a potential US pullback. The Polish zloty and Romanian leu also saw increases.
The euro’s rise helped recover some of last week’s losses, signaling a shift in investor sentiment. Asian stocks opened higher, unaffected by President Trump’s upcoming tariffs on Canada, Mexico, and China.
Europe’s Defense Spending and Geopolitical Tensions
As European leaders commit to increasing defense spending, stocks in defense companies saw a significant boost. Shares of firms like Germany’s Rheinmetall AG, UK-based BAE Systems Plc, Rolls-Royce Plc, and Italy’s Leonardo SpA rose sharply. This surge comes as Britain pushes for a “coalition of the willing” to help secure Ukraine, following recent tensions with the US over the prospects of a ceasefire with Russia.
“The US turnaround is certainly a historic opportunity for Europe to take charge of its defense,” said Christopher Dembik, senior investment manager at Pictet Asset Management. He also warned against excessive optimism, noting that military innovations often have civilian applications, citing the internet as an example.
Bitcoin Holds onto Gains After Trump’s Crypto Reserve Remarks
Bitcoin maintained most of its rally from Sunday, after President Trump mentioned plans to establish a strategic crypto reserve. This statement added a boost to the cryptocurrency market despite ongoing geopolitical tensions.
Global Stock Markets and Tariff Concerns
The S&P 500 rose by 1.6% on Friday, while US Treasuries extended February’s rally, with two-year yields dropping below 4%. This was driven by data showing that inflation in the US was not accelerating. Meanwhile, investors are awaiting the imposition of new US tariffs on Chinese goods and products from Mexico and Canada, scheduled for this week.
In Asia, traders are hopeful that the Chinese government will announce a ramp-up in fiscal spending during this week’s National People’s Congress. This could help sustain domestic demand and offset the risk of US tariffs. The Chinese yuan has strengthened by about 0.6% this year, and Chinese equities have surged by over 12%, significantly outperforming global stock indices.
“We’re confident that the AI-driven optimism in Hang Seng is here to stay in the near term,” said Wee Khoon Chong, senior strategist at BNY, “though a period of consolidation is likely after such strong gains.”
Economic Data and Central Bank Decisions Ahead
Investors are awaiting key economic data this week, including growth reports from Australia and inflation figures from Latin America. The European Central Bank is expected to make a policy decision, with recent inflation data from France and Italy supporting the case for further cuts. Additionally, President Trump will address a joint session of Congress, just as polls suggest he’s losing support from Americans due to concerns over the economy and inflation.
Oil and Gold Prices Rise
In commodities, oil prices increased as markets braced for Trump’s upcoming tariffs. Gold also saw gains at the start of the week.
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