European stocks open higher, as defense stocks build on positive momentum
The London skyline is seen from the Shard, the tallest building in the European Union, as the sun sets on March 28, 2017 in London, England.
Jack Taylor | Getty Images
LONDON — European stocks edged higher on Tuesday, as equities built on positive momentum from the start of the week.
Thirty minutes into the trading session, the pan-European Stoxx 600 index was marginally higher, with most sectors and major bourses trading above the flatline.
Defense stocks continued their rally, with the Stoxx Europe Aerospace and Defense index gaining around 0.2% in early trade. Germany’s Renk was up by 0.8%, while Italian defense contractor Leonardo added 1.4%.
Regional defense stocks were among the strong movers on Monday, amid the market debut of TKMS — the warship division spun off from Thyssenkrupp — and following another tense meeting between U.S. President Donald Trump and Volodymyr Zelenskyy over the weekend.
Third-quarter earnings season is kicking into gear this week with L’Oreal and Assa Abloy due to report Tuesday.
Looking at global markets, U.S. stock futures were slightly higher overnight after Monday’s broad rally. Investors await a busy earnings week that could inform the trajectory of the markets, with Netflix and Coca-Cola set to report on Tuesday.
Elsewhere, Asia-Pacific markets traded higher overnight, with South Korea’s Kospi index jumping more than 2% to hit a sixth consecutive record high, building on a rally spurred by optimism around an impending trade deal with the U.S.
South Korean stocks have been on a roll since U.S. Treasury Secretary Scott Bessent told CNBC in an exclusive interview Wednesday stateside that Washington was “about to finish up” trade negotiations with the Asian country.
UK borrowing rises
In the U.K., official data released on Tuesday showed that public sector borrowing hit £20.2 billion ($27 billion) last month — the highest level for any September since records began in 1997. The figure brought public borrowing in the first half of the financial year up to £99.8 billion, up 13% from the same period a year earlier, marking the second-highest April to September borrowing figure since records began.
It was, however, in line with a forecast made in March by Britain’s Office for Budget Responsibility (OBR).
It comes as the country’s Finance Minister Rachel Reeves prepares to deliver her crucial Autumn Budget, which will impose measures aimed at bringing the government’s expenditure bill and public debt under control.
Thomas Pugh, chief economist at consulting firm RSM UK, said in a note that the data was “a little bit of good news” for Reeves, given that spending was in line with forecasts, but he added that the figures “paint a picture of deteriorating public finances.”
“Looking ahead to the budget in the autumn, we are pencilling in tax increases of around £30bn,” he said.
Yields on U.K. government bonds, known as gilts, were little changed across the curve on Tuesday morning. Longer maturity 30-year gilts were the exception, with yields on those bonds losing 2 basis points to trade at 5.293%. The U.K.’s government has the highest long-term borrowing costs of any G-7 nation.
The British pound was last seen trading 0.2% lower against the U.S. dollar at around $1.3385.
— CNBC’s Nur Hikmah Md Ali, Hugh Leask and Pia Singh contributed to this market report.
