European Markets Rise on Defence Spending, U.S. Faces Economic Uncertainty:

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Index Update: The FTSE 100 index, a key benchmark index for the London stock exchange, went up around 0.53% on 03 March 2025.

Macro Update:  European leaders, under the leadership of British Prime Minister Keir Starmer, have agreed to formulate a Ukraine peace plan to present to the United States, a crucial step toward securing security guarantees that Kyiv deems essential to deter Russian aggression. This decision follows Ukrainian President Volodymyr Zelenskiy’s contentious meeting with U.S. President Donald Trump, where tensions arose over Washington's commitment to Ukraine. European leaders, however, reinforced their strong backing for Kyiv and pledged increased support. Meanwhile, energy giant Shell is reportedly considering the sale of its chemicals assets in Europe and the U.S., with Morgan Stanley leading a strategic review of its operations. In financial markets, the UK's FTSE 100 reached a record high, closing 0.6% higher, buoyed by strong corporate earnings, including those from British Airways parent IAG. A weaker pound also contributed to the market rally.

Top Market Movers: Among top gainers on FTSE 100 index, Bae Systems PLC (LSE: BA.) witnessed a rise of 12.44% followed by Rolls-Royce Holdings PLC (LSE: RR.) which gained around 5.13%.

Commodity Update: The euro bounced back from a 2.5-week low against the U.S. dollar on Monday, with the British pound also gaining as Europe led efforts for peace in Ukraine. The Canadian dollar and Mexican peso strengthened after U.S. Commerce Secretary Howard Lutnick suggested tariffs may be less than the expected 25%. In commodities, gold rose 1.08% to $2,879.14, silver climbed 1.20% to $31.87, and copper gained 0.40% to $9,402.50. Brent crude oil increased by 1.10% to $73.57, fueled by uncertainty over a U.S.-brokered peace deal and bargain buying, though prices remained near their lowest of the year.

Our Stance: European markets remain strong, with defence stocks leading gains after European leaders committed to increased military spending and drafting a Ukraine peace plan for the U.S. Meanwhile, the euro rebounded 0.3% to $1.0404, recovering from a two-and-a-half-week low, as investors assessed the geopolitical landscape and the impact of defence spending. In contrast, U.S. markets show signs of concern. The S&P 500 has declined 4% from its recent all-time high, and falling Treasury yields and Bitcoin’s slide indicate rising investor caution. Economic data, including consumer confidence, business activity, and retail sales, have weakened, raising fears of an economic slowdown. The upcoming U.S. jobs report will be a key test of market sentiment, as investors try to gauge whether recent declines are temporary or signal deeper economic risks. The Trump administration’s aggressive trade policies and political uncertainty are adding further pressure on both consumer and business confidence.

FTSE 100

The FTSE 100 opened at 8,809.74 on Monday and showed a gain of 0.57%, surge to 8,859.82. forming forming a bullish candlestick pattern, the index continues to maintain a positive market sentiment. It closed near the 21-period Simple Moving Average (SMA), indicating a favourable short-term outlook. The 50-period SMA serves as a strong support level, suggesting the potential for continued upward momentum. The Relative Strength Index (RSI) stands at 69.86, reflecting healthy bullish strength without entering overbought territory, which suggests room for further gains. These technical signals indicate a positive trend, making the FTSE 100 an attractive option for short-term investors.

Data Source - Refinitiv