Defense stocks fall as talks continue to end Ukraine war; European markets finish lower

LONDON — European stocks ended lower on Tuesday, reversing gains seen at the start of the week.

The pan-European Stoxx 600 finished the session down 0.4%, with most sectors and major bourses in negative territory.

Developments in Russia-Ukraine peace negotiations remain in focus, after Ukrainian President Volodymyr Zelenskyy said over the weekend that Kyiv was willing to give up its NATO membership ambitions in order to secure a deal to end the war.

U.S. President Donald Trump, meanwhile, told reporters on Monday that after “long and very good talks” with European leaders, negotiators were “closer now than we have been ever” to stopping the conflict.

The Stoxx Europe Aerospace and Defense sector closed 1.8% lower, with Sweden’s Saab finishing the day down 4.8%. Germany’s Rheinmetall and Renk ended the session down 4.5% and 4.3%, respectively, and were also among the stocks seeing the biggest losses in Europe on Tuesday.

Investors in Europe were also gearing up for a busy week of central bank action.

The European Central Bank’s final policy meeting of the year takes place on Thursday, and while the bank is expected to keep rates at 2%, ECB President Christine Lagarde said the central bank was likely to lift its growth forecasts again in December, after raising its prediction for annual GDP growth to 1.2% back in September.

The Bank of England, Riksbank, and Norges Bank will also hold their last monetary policy decisions for 2025 this week. It could be a close call, but the BOE is expected to trim interest rates.

In the U.K., data from the Office for National Statistics published Tuesday showed that the country’s unemployment rate rose slightly to 5.1% in the three months to October, as businesses awaited the critical Autumn Budget. It puts Britain’s unemployment rate at its highest since the three months to Jan. 2021. Tuesday’s estimates also showed the number of payrolled employees fell by 0.5%, or 149,000, in the year to October.

Yields on U.K. government bonds, known as gilts, were flat following the ONS labor market update, while the British pound was little changed against both the U.S. dollar and the euro.

Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said in a note following the data release that the figures made a rate cut from the Bank of England “inevitable.”

“The concerning pace at which the labour market is unravelling means that an interest rate cut on Thursday looks inevitable as these figures will [undoubtedly] aggravate concerns over the strength of economic conditions,” he said.

Eurozone and U.K. inflation figures are also out on Wednesday, which could also influence monetary policy decisions.

European leaders’ mettle will also be tested this week as they address funding for Ukraine at a summit in Brussels on Thursday, including the possible use of billions of frozen Russian assets to underpin a 210-billion-euro loan ($246 billion) to Kyiv.

Asia-Pacific markets fell across the board overnight, tracking Wall Street declines as investors continued to rotate out of the artificial intelligence trade.

In the U.S., stocks dipped after November’s delayed jobs report showed U.S. nonfarm payrolls totaled 64,000, which was an improvement from the 105,000 decline in October.

— CNBC’s Pia Singh contributed to this market report.