European stock markets saw a small increase on Tuesday, with both the STOXX 50 and STOXX 600 indices rising by almost 0.2%, bouncing back slightly after a quiet day on Monday.
Traders were generally cautious and avoided making big moves while waiting for the US. Federal Reserve’s interest rate decision, which is due tomorrow. Markets also reacted to news that US President Trump will allow Nvidia to ship its advanced H200 AI chips to “approved customers” in China.
Defense company stocks were notable gainers, including Hensoldt, Rheinmetall, and BAE Systems, after reports suggested German lawmakers are set to approve a record €52 billion worth of military spending next week. Renewable energy stocks were also up, with Orsted gaining after a US federal judge reportedly found President Trump’s proposed ban on wind energy to be illegal.
However, offsetting these gains was a sharp drop of over 13% in the stock of Thyssenkrupp, which finished at the bottom of the STOXX 600 after forecasting a significant loss of up to €800 million for the year 2026
On the FX front, the Australian dollar got stronger after the Reserve Bank of Australia (RBA) chose to keep its interest rates steady, a decision that had been widely expected. The Australian currency rose by 0.2% as markets waited for the US Federal Reserve’s important meeting later this week, especially since the RBA warned that a recent rise in inflation might continue.
Meanwhile, the Japanese yen also gained ground in Asian trading following a strong 7.5-magnitude earthquake in Japan’s northeast, which made investors cautious before the expected decisions from the US Fed and other central banks. Also helping the yen was strong interest in an auction of five-year Japanese government bonds.
The overall US dollar index remained mostly unchanged.
Separately, the euro stabilized after European Central Bank (ECB) board member Isabel Schnabel suggested that the ECB’s next move might be to raise interest rates, not cut them as some people expect, though she clarified that a move would not happen very soon.
The British pound and the New Zealand dollar also both saw small gains
Currency Power Balance
