Rally in Europe: investors bet on the defense sector

European futures hit all-time highs on Tuesday, helped by a surge in defense stocks. Expectations of increased military spending spurred demand for arms makers, causing a surge in prices in the sector.

Asian markets: Hong Kong on the brink of a three-year record

In parallel, investors in Asian markets reacted positively to a meeting between Chinese President Xi Jinping and representatives of the largest companies. Hong Kong stocks approached their highest in three years, reflecting growing business confidence in the prospects of the Middle Kingdom's economy.

Reserve Bank of Australia cautious about rate cuts

The Australian central bank, as expected, began a cycle of monetary easing. However, the rate cut was carried out in a restrained manner, which supported the Australian dollar at $0.6350. Investors took this as a signal of moderate flexibility from the regulator, rather than an aggressive reduction.

American and Japanese markets follow the trend

S&P 500 futures showed a rise of 0.2%, while European contracts strengthened by 0.1%. Japan's Nikkei index (.N225) also added 0.5%, thanks to demand for banking and defense stocks, repeating the dynamics of the European market.

European defense sector is the new engine of growth

The day before, the pan-European STOXX 600 index (.STOXX) closed up by 0.5%, while shares of the defense and aerospace industry (.SXPARO) jumped by 4.6%, reaching an all-time high. The sector has more than doubled in value over the past three years, and investors are confident that this trend will continue.

Militarization: Analysts Predict Increase in Arms Orders

Financial experts note that the era of minimal defense budgets in Europe is over. An active race for military contracts is beginning, which promises a sharp increase in the income of key players in the industry.

"If European countries increase defense spending to 5% of GDP, as Trump proposed, this will give a strong boost to Rheinmetall, SAAB, BAE Systems, Thyssenkrupp and Thales," predicts IG Markets analyst Tony Sycamore.

Thus, global markets continue to move up, and investors are betting on increased military spending and the recovery of the Asian economy.

Euro rate: balance on the verge of a breakthrough

During the Asian trading session, the euro rate held near the $1.0455 mark, demonstrating caution ahead of the upcoming elections in Germany. However, IG Markets analyst Tony Sycamore notes that a strong break of $1.0530 could pave the way for a rally to $1.06 and beyond, which could lead to increased volatility in the forex market.

US Markets: Returning from the Holiday

US trading floors are set to reopen later on Tuesday after the holiday, which could set a new tone for global investors. With defense and technology stocks enjoying a recent surge, traders are eagerly awaiting the first signs from Wall Street.

Chinese Markets on the Rise: Support for Businesses and Growth in Tech

Chinese stock markets continued to rally after President Xi Jinping held a rare meeting with top business leaders, sending the Hang Seng Index (.HSI) to its highest since October and the Tech Index (.HSTECH) to a three-year high. However, the rapid rise was followed by a brief sell-off as profit-taking took hold.

China Tech: Betting on AI and Electric Vehicles

China's tech index has gained more than 25% since the start of the year, helped by a surge in artificial intelligence stocks.

"I believe China will be the global leader in AI, just as it is in electric vehicles," said Britney Lam, who runs the family-owned LAM Group. She said the country has all the resources it needs: access to data, energy, highly skilled workers, and semiconductor manufacturing capacity.

Baidu and Alibaba: Investors React to Founders' Public Appearances

Baidu (9888.HK) shares have steadied after falling on Monday, despite concerns from investors about the company's founder's absence from a meeting with President Xi. Baidu is set to report earnings later Tuesday, which could weigh on the stock's performance.

Meanwhile, Alibaba (9988.HK) shares rose 2% after founder Jack Ma appeared on state television shaking hands with China's leader, a moment that was seen by the market as a sign of a possible warming of relations between the government and the country's biggest tech companies.

Global Markets: Looking Ahead

With Chinese tech stocks rallying, European defense demand steady and the U.S. markets set to reopen, investors are cautiously optimistic about the outlook for the coming weeks. Markets continue to watch geopolitical cues, interest rate moves and corporate earnings for new growth vectors.

BHP posts lowest profit in six years, but sees hope in China

Mining giant BHP (BHP.AX) rose 0.4% despite reporting weak first-half earnings. The company's profits hit their lowest in six years, but management expressed cautious optimism, citing signs of a recovery in the Chinese economy. That signal was enough to support the stock as China remains the world's largest consumer of commodities.

Focus on economic data and German elections

Investors are focused on February business activity data from around the world this week, which will provide insight into the state of the global economy. In Europe, markets are particularly keen to watch the upcoming German elections, as their outcome could impact the policies of the EU's largest economy.

Japanese yen holds its ground, pound awaits macro data

The Japanese yen consolidated around 152.06 after a strong rally the previous day. Positive macro data has fueled expectations that the Bank of Japan may raise interest rates in the coming months, supporting demand for the national currency.

The pound, meanwhile, traded around $1.2597, slightly off a two-month high. Investors are taking a wait-and-see approach ahead of UK labour market and inflation data, which could shape the country's monetary policy stance.

Gold Shows Steady Gains

After hitting a new all-time high of $2,913 an ounce on Friday, gold has strengthened again, marking its seventh straight week of gains. Investors continue to view the precious metal as a safe haven amid geopolitical instability and expectations of further interest rate fluctuations in the world's leading economies.

OPEC+ May Slow Oil Production Growth Despite Trump's Pressure

OPEC+ countries are considering suspending their planned April oil production increase despite former US President Donald Trump's calls for lower prices, according to Bloomberg News. The decision is due to uncertainty in the oil market and attempts to maintain a balance between supply and demand.

Oil Prices: Brent Holds Steady

Brent crude oil prices continued to hold onto the gains recorded during the previous session, trading at $75.39 a barrel. Investors are closely monitoring OPEC+ decisions, as any changes in their strategy could significantly affect the dynamics of commodity prices in the coming months.

Global Markets at a Turning Point: What's Next?

With signs of recovery in China, key economic data pending, and the German election looming, global markets continue to balance caution and optimism. Investors are closely monitoring macroeconomic indicators, currency movements, and commodity markets to determine where capital will flow next.

Investors are cutting cash holdings to 15-year lows

Market optimism has reached new heights, with investors cutting their cash holdings to 3.5%, the lowest since 2010, according to Bank of America (BofA). Market participants are actively increasing their long positions in equities while cutting their holdings in other assets, indicating high confidence in the stock market, according to a new report from BofA Global Research.

Focus on Bond-Sensitive Sectors

As fears of a global recession subside, investors are turning their attention to sectors that traditionally respond to interest rate changes. Pharmaceuticals, biotech, utilities and real estate investment trusts (REITs) are among the favorites. There is also a growing interest in European assets, as geopolitical risks, including trade wars, are perceived more as secondary threats than as major market pressures.

Tech Rotation: Biggest Drop Since 2022

BofA's monthly global survey of 168 asset managers with combined capital of $401 billion shows that the share of investments in the tech sector has fallen at a record pace in the past month, the largest decline since September 2022. While the tech sector remains a key player in investors' portfolios, clear signs of overheating have forced many to trim their positions.

Long Mag 7 Retains Leadership, but US Loses Exclusivity

Despite the overall optimism, BofA analysts note that the Long Mag 7 strategy (investing in the seven largest tech companies, including Microsoft, Apple, Google and others) remains the most popular in the market. However, concerns are growing about the overvaluation of US assets: 89% of investors surveyed believe that US stocks have reached excessively high levels. This signals a possible increase in demand for alternative markets and sectors in the coming months.

Markets at a Crossroads: What's Next?

A decrease in the share of cash and a change in the composition of investment portfolios indicate a high degree of confidence among market participants. However, if overheating in certain sectors continues, investors will have to rethink their strategies, especially in the face of uncertainty around the future of central bank policies and the global macroeconomic environment.