European markets are expected to open broadly higher on Tuesday, February 18, 2025, despite the ongoing geopolitical tensions surrounding the Ukraine conflict. The FTSE 100, DAX, and FTSE MIB are all projected to experience gains, with the FTSE 100 climbing by 3 points to 8,768, Germany’s DAX rising by 64 points to 22,857, and Italy’s FTSE MIB set to increase by 185 points to 38,587. However, the backdrop of these market movements is shaped by heightened concerns over the ongoing war in Ukraine, particularly as U.S. and Russian officials prepare for talks that have excluded Ukrainian and European representatives.
The exclusion of Europe from these talks has been a key point of contention, prompting European leaders to gather for an emergency summit in Paris on February 17, 2025. During the summit, leaders discussed how to respond to the evolving situation in Ukraine, with defense spending being a primary focus. While there was agreement on the need to bolster defense budgets, the leaders struggled to align on whether peacekeeping troops should be deployed to Ukraine following a potential peace deal. This lack of consensus has left many questions unanswered regarding Europe’s role in the region’s security.
In the U.K., the latest unemployment figures show that the jobless rate held steady at 4.4% in the final quarter of 2024, showing no change from the previous quarter. However, the figure represents an increase of 0.5 percentage points compared to the same period the previous year, pointing to growing challenges within the labor market. Many businesses have expressed concerns about rising employer costs due to tax hikes, which are expected to limit their ability to hire new workers. Despite these concerns, UK Finance Minister Rachel Reeves has defended her fiscal policies, pledging to work towards reviving economic growth and improving conditions for businesses.
British Prime Minister Keir Starmer has also addressed the broader issue of European security in light of the Ukraine conflict. At the Paris summit, he stated that a U.S. security guarantee would be crucial for deterring Russia from further aggression, highlighting the importance of U.S. support for any peace deal. However, he emphasized that European nations must step up their defense efforts and spend more on security. Starmer’s remarks reflect growing pressure on European countries to take more responsibility for their defense, especially after discussions at the Munich Security Conference, where European defense stocks rose to record levels.
As European markets prepare to open, attention will also turn to upcoming economic data and earnings reports. French inflation figures and the latest ZEW survey of economic sentiment in Germany and Europe are expected to provide crucial insights into the region’s economic health. Corporate earnings reports from companies such as Capgemini and InterContinental Hotels Group will further inform market sentiment. While geopolitical tensions remain a dominant force, these economic indicators could offer investors a clearer picture of the region’s financial stability as it navigates the complex challenges posed by both economic factors and security concerns.
SOURCE: CNBC