FRANKFURT: European shares extended gains on Tuesday, led by materials and financial stocks, as investors continued to draw optimism from prospects of a ceasefire in Ukraine and expectations of interest rate cuts in the world’s largest economy.
The pan-European STOXX 600 closed up 0.91 percent at 568.01. Major regional bourses also ended higher, with Germany’s DAX and France’s CAC up 1 percent and 0.8 percent, respectively.
Prospects for an end to the nearly four-year-old Russia-Ukraine war continued to drive the STOXX 600 index, with European construction and materials stocks extending their rally, up 2.4 percent. Germany’s Heidelberg Materials jumped 6.6 percent, cement maker Buzzi rose 6.1 percent, and stone-wool manufacturer Rockwool surged 4.5 percent.
Ukraine on Tuesday signalled support for the framework of a peace deal with Russia but stressed that sensitive issues needed to be fixed at a meeting between President Volodymyr Zelenskiy and US President Donald Trump.
The European defence sector was up 1 percent after sliding over 5 percent in the last two sessions on expectations that the war in Ukraine was approaching its end.
The European Parliament approved a 1.5 billion euro (USD1.7 billion) scheme to fund defence investments across the EU and support Ukraine, while Britain separately pledged to deliver more air defence missiles to Kyiv in the coming weeks.
“It’s been back and forth since last week with the peace-talk news, but it looks like the Russians are not going to play ball and the deal could just fizzle out. That means Europe still needs to spend more on defence, which would’ve been the case anyway,” said Chris Beauchamp, chief market analyst at IG Group.
Meanwhile, global markets assessed a mixed set of delayed US data that largely kept expectations of a Federal Reserve interest rate cut in December intact.
Odds for a December rate cut stood at 82.7 percent, according to the CME Group’s FedWatch tool.
The data comes after Fed Governor Christopher Waller suggested that continued weakness in labour data could warrant another quarter-point rate cut in December, supporting New York Fed President John William’s comments.
Back in Europe, banks jumped 1.8 percent, mirroring their British peers ahead of UK Finance Minister Rachel Reeves’ budget announcement on Wednesday. A Goldman Sachs note cited a Financial Times article indicating that the banking sector would be exempted from tax increases.
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