Samuel Indyk

Europe's rush to boost funding for military spending has sent defence stocks on a tear, though investors are now wondering how much more they're willing to pay for exposure to the region's biggest rearmament buildup since World War Two.

Some of Europe's most popular AI-linked stocks fell for a second day on Tuesday, after an analyst note late last week that flagged a possible slowdown by Microsoft on data centre leasing knocked sentiment ahead of make-or-break results from Nvidia .

A growing number of investors and strategists expect a correction in their local European stock market over the coming three months, before the region's equities start rising again and hitting new highs in 2026, a Reuters poll found.

An election win for Germany's conservatives has eased concerns of political gridlock in Europe's biggest economy, though it failed to lift uncertainty around whether a new government can deliver fiscal reforms that would boost sluggish growth.

European stocks have hit record highs this month, as companies have beat fourth-quarter revenue expectations, but the topic that dominates the conversation among executives in the region is U.S. tariffs.

Sunday's German election may result in a conservative-led coalition government that faces pressure for much-needed change to revive the stagnant economy - and moves to block reform by populist parties if they do well.

Shares in BP rose by 7% on Monday, and were on track for the biggest daily gain in two years, as investors anticipated that activist shareholder Elliott Management will press for board changes and strategy shifts to boost returns.

Shares in British luxury retailer Burberry soared by more than 13% in opening trade on Friday after its third-quarter sales fell by less than forecast.

The pound fell against a rebounding dollar on Tuesday even as U.S. President Donald Trump stopped short of implementing tariffs as signs of a softening British labour market reinforced expectations for a February rate cut from the Bank of England.

MSCI's global equities index rose on Friday while U.S. Treasury yields turned higher with the dollar as upbeat economic data and earnings appeared to help investors shrug off any jitters ahead of the U.S. presidential inauguration.