European markets maintained a steady position on Tuesday, mirroring a broader sense of global caution as critical diplomatic discussions and shifting tech narratives took center stage.
The pan-European STOXX index held firm at 819.22 points in early trading, with the majority of sectors managing to stay in positive territory. Attention was heavily fixed on high-stakes diplomacy, specifically the indirect nuclear negotiations between the US and Iran in Geneva, alongside US-mediated peace talks between Ukraine and Russia regarding territorial disputes.
The prospect of easing geopolitical friction had a direct impact on the defense sector, with related stocks sliding 1.2% as investors speculated that a successful diplomatic resolution might dampen the immediate demand for military hardware.
Simultaneously, broader market sentiment began to stabilize after a volatile period; the “AI panic” that previously gripped the market showed signs of cooling as fears that artificial intelligence would immediately erode the margins of traditional business models started to subside.
Corporate earnings reports provided a mixed bag for individual stocks.
On the winning side, InterContinental Hotels Group (IHG) saw its shares climb 1.1% following a fourth-quarter revenue performance that outpaced market expectations.
Conversely, despite reporting a massive 52% surge in annual core profits, mining giant Antofagasta saw its stock price tumble 3.2%, weighed down by a decline in global copper prices.
On the FX front, the Japanese yen staged a notable recovery on Tuesday, rebounding by 0.50% to 152.80 against the dollar and climbing 0.52% to 180.97 against the euro. This rally effectively erased Monday’s losses, fueled by investor confidence that Prime Minister Sanae Takaichi’s expansionary fiscal policies will continue to provide structural support for the currency.
In contrast, the US dollar maintained a slight upward trajectory, with the dollar index reaching 97.12 following a steady two-session gain, while the euro softened slightly to $1.1843.
The British pound faced downward pressure, sliding 0.35% to $1.3582 after fresh labor market data revealed that UK unemployment hit a five-year peak in December. This cooling of the labor market and easing wage growth has intensified speculation that the Bank of England may move toward further interest rate cuts.
Similarly, the Australian dollar edged lower to $0.7069 as recently released minutes from the Reserve Bank of Australia reflected a board divided on the necessity of future rate hikes, despite acknowledging that inflation has remained stubbornly above target for three consecutive years.
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