European Markets Set to Rise as Defense Stocks Surge and UK Borrowing Data Released

European stock markets are poised to open higher on Tuesday, extending gains seen at the start of the week. London’s FTSE 100 is up 0.31%, Germany’s DAX rises 0.22%, France’s CAC 40 gains 0.2%, and Italy’s FTSE MIB climbs 0.33%, according to IG data. Investors are focusing on defense stocks, which have led Monday’s market momentum and contributed to growing optimism across the region.

The European defense sector saw remarkable growth on Monday. Germany’s Thyssenkrupp surged nearly 7.9% following the spinout and IPO of its warship manufacturer TKMS. Other defense companies also performed strongly: Hensoldt added almost 8%, Renk rose 6.7%, and Rheinmetall climbed 5.9%, amid ongoing geopolitical tensions and recent discussions between U.S. President Donald Trump and Ukrainian President Volodymyr Zelenskyy over territorial disputes.

Investors are also eyeing the third-quarter earnings season, with major companies like L’Oréal and Assa Abloy scheduled to report Tuesday. Globally, U.S. stock futures edged higher following Monday’s rally, while Asia-Pacific markets continued to climb. South Korea’s Kospi index jumped more than 2% to reach a sixth consecutive record high, fueled by optimism over an imminent U.S.-South Korea trade agreement.

In the UK, official figures show public sector borrowing reached £20.2 billion ($27 billion) last month—the highest September level since records began in 1997. This brought total borrowing for the first half of the fiscal year to £99.8 billion, a 13% increase from last year. Economists note that while spending aligns with forecasts, the data underscores ongoing pressure on public finances as Finance Minister Rachel Reeves prepares her Autumn Budget, which could include £30 billion in tax increases to manage debt.

UK government bond yields were largely stable, except for 30-year gilts, which rose 2 basis points to 5.332%. The British pound traded slightly lower against the U.S. dollar at $1.3385. Analysts suggest that while the European markets continue to show resilience, UK borrowing trends and global earnings reports will remain key factors influencing investor sentiment in the coming weeks.

source: cnbc