Europe markets open: Stoxx edges higher; defense stocks rally amid geopolitical tensions

European stocks opened slightly higher on Tuesday, building on the positive momentum from the start of the week, though a new report showing record UK government borrowing has put a damper on early gains.

Thirty minutes into the trading session, the pan-European Stoxx 600 index was marginally higher, with sectors and major bourses trading in mixed territory.

UK borrowing hits a record for September

Official data released on Tuesday showed that the UK’s 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 total borrowing for the first half of the financial year to £99.8 billion, the second-highest April-to-September figure on record.

While the number was in line with forecasts from Britain’s Office for Budget Responsibility (OBR), it highlights the fiscal challenge facing the government. 

Defense stocks continue their rally

The defense sector continued its recent rally on Tuesday, with the Stoxx Europe Aerospace and Defense index gaining around 0.2 percent in early trade.

The sector was among the strong movers on Monday, buoyed by the market debut of the warship division spun off from Thyssenkrupp and ongoing geopolitical uncertainty.

Global markets look to earnings and US trade deal hopes

Third-quarter earnings season is set to kick into gear this week, with reports due from L’Oreal and Assa Abloy on Tuesday.

In the US, investors are awaiting results from Netflix and Coca-Cola.

Global sentiment has been supported by a broad rally that began overnight in Asia, where South Korea’s Kospi index surged to a sixth consecutive record high.

That rally was spurred by optimism around an impending trade deal with the US after Treasury Secretary Scott Bessent told CNBC that Washington was “about to finish up” negotiations with the country.

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