European markets rise as defense stocks continue rally

The U.K.’s unemployment held steady at 4.4% in the three months to December, data from the country’s Office for National Statistics showed on Tuesday.

The figure was flat on the previous quarter, when unemployment in the U.K. hit its highest level since the three months to May 2024. On an annual basis, the jobless rate was up by 0.5 percentage points.  

A hike in employer National Insurance contributions — a tax on workers’ income — announced by Britain’s government in October, was met with backlash as employers warned rising costs would limit their ability to take on new staff. In a November survey by the Confederation of British Industry, almost half of businesses said they planned to trim their workforces to cope with increasing expenses.

Finance Minister Rachel Reeves has defended her fiscal policies, arguing that she is “fighting every single day … to kick start the economy.”

— Chloe Taylor

European leaders gathered in Paris on Monday to discuss the path to peace in Ukraine, ahead of U.S.-Russia talks on ending the war that have so far excluded Ukrainian and other regional representatives.

After the emergency summit in the French capital, British Prime Minister Keir Starmer told reporters the war in Ukraine was an “existential question for Europe as a whole.”

“I’m prepared to consider putting British forces on the ground, alongside others, if there is a lasting peace agreement,” he said on Monday evening. “But there must be a U.S. backstop – because a U.S. security guarantee is the only way to effectively deter Russia from attacking Ukraine again.”

Starmer also addressed Europe’s role in bolstering its own defenses, something the Trump administration has been pressuring regional leaders to commit to in the form of increased defense spending. On Monday, European defense stocks rose to a record high after the weekend’s Munich Security Conference saw officials discuss hiking their defense budgets.

“President Trump has long expressed the wish for Europe to step up and meet the demands of its own security,” Starmer said on Monday. “Today’s informal meeting was a vital first step in responding to that challenge. On defense, it’s clear the U.S. is not going to leave NATO — but we Europeans will have to do more … Europeans will have to step up, both in terms of spending and the capabilities that we provide.”

Starmer told reporters he would travel to Washington next week to meet Trump.

— Chloe Taylor

European markets are expected to open broadly higher Tuesday.

The U.K.’s FTSE 100 index is expected to open 3 points higher at 8,768, Germany’s DAX up 64 points at 22,857, France’s CAC flat, down 1 point at 8,194 and Italy’s FTSE MIB 185 points higher at 38,587, according to data from IG.

Earnings are set to come from Capgemini and the InterContinental Hotels Group. On the data front, French inflation data is due, as is the latest ZEW survey of economic sentiment in Germany and Europe.

— Holly Ellyatt