Euro, Stocks Climb as Traders Focus on Ukraine: Markets Wrap

(Bloomberg) — The euro gained in early trading with Eastern European currencies as the region’s leaders scrambled to offer Ukraine their support amid concerns of a US pullback.

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The common currency rose 0.4% against the dollar, outperforming major peers and paring some of last week’s loss. The Polish zloty and Romanian leu also gained. Asian stocks opened higher, unswayed by Trump preparing to slap long-promised tariffs on Canada, Mexico and China.

“The US turnaround is certainly a historic opportunity for Europe to tackle the subject of an autonomous European defense with potentially very positive economic ramifications since we know that many innovations with military application can have significant civilian benefits – the internet for example,” said Christopher Dembik, senior investment manager at Pictet Asset Management. “But beware of excessive optimism.”

Bitcoin largely held onto its Sunday rally after President Donald Trump talked up his plan for a strategic crypto reserve.

Markets are starting the week with another geopolitical one-two punch as European leaders pledge to increase defense spending and assemble what Britain called a “coalition of the willing” to secure Ukraine. That follows an Oval Office clash between Trump and Ukrainian President Volodymyr Zelenskiy over the prospects of a ceasefire with Russia without American security guarantees.

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The prospect of a surge in defense spending by European countries has led to a sharp rally in the shares of companies involved in the sector, such as Germany’s Rheinmetall AG, the UK’s BAE Systems Plc and Rolls-Royce Plc as well as Italy’s Leonardo SpA. Still, German and French bond futures dropped amid concern about rising debt issuance by the bloc.

“Europe is getting ready to stand up for itself — this reflects a structural change within Europe,” which has driven some of the rotation away from the US this year, Kieran Calder, Union Bancaire Privee SA head of equity research for Asia. “For China overall, we’re still a bit negative.”

The S&P 500 rose 1.6% Friday while Treasuries extended February’s rally, with two-year yields dropping below 4% after data showed US inflation isn’t heating up.

Australian and Japanese shares rose on Monday along with the benchmark in Hong Kong. Mixue Group, China’s largest bubble-tea chain, surged in its trading debut in the city.

Investors are waiting for news of any last minute negotiations to avoid a further increase in US trade tariffs on Chinese goods that are due to come into effect this week along with levies on Mexico and Canada.

In Asia this week, traders’ hopes are running high that a ramp-up in fiscal spending will be announced at China’s National People’s Congress to bolster domestic demand, offsetting the risk of US tariffs and sustain this year’s blistering rally. The Chinese yuan has strengthened about 0.6% this year while a gauge of the nation’s equities has jumped more than 12%, almost five times the gain of an index of global stocks, according to data compiled by Bloomberg.

“We are reasonably confident the AI-driven optimism and momentum in Hang Seng is here to stay in the near-term, but a period of consolidation is warranted following the record year-to-date gains,” said Wee Khoon Chong, a senior strategist at BNY.

Elsewhere, growth data in Australia as well as inflation readings in Latin America are due this week. The European Central Bank will give a policy decision after inflation readings in France and Italy last week supported the case for further cuts. Trump will also address a joint session of Congress just as two polls suggest he’s losing support from Americans concerned about the economy and inflation.

In commodities, oil rose at the start of the week as the market prepared for Trump’s tariffs. Gold gained.

Key events this week:

China Caixin manufacturing PMI, Monday
Eurozone CPI, HCOB manufacturing PMI, Monday
UK S&P Global manufacturing PMI, Monday
Japan unemployment, Tuesday
Eurozone unemployment, Tuesday
US President Donald Trump’s speech to a joint session of Congress, Tuesday
Australia GDP, Wednesday
China Caixin services PMI, Wednesday
China’s National People’s Congress, Wednesday
Eurozone HCOB services PMI, PPI, Wednesday
BOE Governor Andrew Bailey and colleagues speak, Wednesday
Eurozone retail sales, ECB rate decision, Thursday
Eurozone GDP, Friday
US nonfarm payrolls, consumer credit, Friday

Some of the main moves in markets:

Stocks

S&P 500 futures were little changed as of 10:28 a.m. Tokyo time
Japan’s Topix rose 1.5%
Australia’s S&P/ASX 200 rose 0.4%
Hong Kong’s Hang Seng rose 0.8%
The Shanghai Composite rose 0.2%
Euro Stoxx 50 futures rose 0.3%

Currencies

The Bloomberg Dollar Spot Index fell 0.2%
The euro rose 0.4% to $1.0421
The Japanese yen was little changed at 150.66 per dollar
The offshore yuan was little changed at 7.2877 per dollar

Cryptocurrencies

Bitcoin fell 1.4% to $92,940.42
Ether fell 2.6% to $2,459.33

Bonds

Commodities

West Texas Intermediate crude rose 1% to $70.44 a barrel
Spot gold rose 0.4% to $2,869.95 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Greg Ritchie, Matthew Burgess, Julien Ponthus and Allegra Catelli.

(An earlier version corrected Zelenskiy’s title.)