Euro, Stocks Gain as Europe Seeks Ukraine Plan: 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. The Polish zloty and Romanian leu also climbed. European equity futures pointed to a stronger open, tracking Asian stocks higher. Advances in Hong Kong were underpinned by a rally in technology shares.

Markets are starting the week with geopolitics dominating as European leaders assemble what Britain called a “coalition of the willing” to secure Ukraine following an Oval Office clash between US President Donald Trump and Ukrainian President Volodymyr Zelenskiy. China is also due to stage its biggest political huddle of the year just as US tariffs threaten to test Beijing’s ability to boost economic momentum.

“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 edged lower after a Sunday rally with Trump talking up his plan for a strategic crypto reserve.

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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 stock rally.

“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.

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.

Meanwhile, 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.”

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.

In other corporate news, Prada SpA is moving closer to a deal to buy Versace from Capri Holdings Ltd. after agreeing to a price of nearly €1.5 billion ($1.6 billion), according to people familiar with the matter. Prada’s shares rose as much as 3.9% in Hong Kong Monday.

Thousands of Chinese delegates including ministry chiefs and provincial leaders will gather Wednesday in Beijing for the parliamentary meeting, where officials will set a bullish growth goal of around 5%, according to analysts surveyed by Bloomberg.

To get there, policymakers are expected to push China’s official budget deficit target to the highest in over three decades, pumping trillions of yuan into a system battling deflation, industrial overcapacity, a still-floundering property market and a trade war with the US.

Oil rose on Monday as the Trump-Zelenskiy row likely means that achieving a solution agreed upon by all parties — and therefore a easing of sanctions — will be harder harder. Gold also gained.

Elsewhere this week, the European Central Bank will give a policy decision after inflation readings in France and Italy 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.

Key events this week: