European futures hit record peaks on Tuesday as defence stocks soared on expectations of a spending bump, while Hong Kong shares were on the verge of three-year highs as investors cheered business leaders’ meeting with President Xi Jinping.

Australia’s central bank began its rate cut cycle, as expected, and the Australian dollar found support at $0.6350 as a cut came with caution on further easing.

S&P 500 futures were up 0.2% and European futures were up 0.1%. Japan’s Nikkei (.N225), opens new tab rose 0.5% with bank and defence-related shares taking cues from Europe’s rally.

On Monday, the pan-European STOXX 600 index (.STOXX), opens new tab closed 0.5% higher as a gauge of defence and aerospace stocks (.SXPARO), opens new tab surged 4.6% to lifetime peaks, having already more than doubled in value since Russia invaded Ukraine three years ago.

Investors expect earnings in the industry to continue to rise strongly, driven by a significant surge in defence budgets to meet new security needs – which analysts have dubbed a “supercycle” for the sector.

Hopes for an end to hostilities in Ukraine also improved sentiment in other sectors in Europe.

“A resolution to the conflict in Ukraine could deliver positive growth impulses for Europe, including improved consumer confidence, lower energy prices, and easier financial conditions,” Bruno Schneller, managing director at Erlen Capital Management.

French President Emmanuel Macron on Monday hosted an emergency summit on Ukraine after U.S. officials suggested Europe would have no role in any talks this week in Saudi Arabia aimed at ending the conflict.

Britain said it was ready to send peacekeeping troops to back up any deal, while Russian and U.S. officials prepared to meet for their own talks on Tuesday in Saudi Arabia.

Ukraine’s President Volodymyr Zelenskiy said on Monday that the country would not recognise any decisions made in deliberations where they were not present.

DELAYED THREATS

U.S. markets were closed overnight for a public holiday.

In China, markets have been buoyed by Monday’s rare meeting between Xi and business leaders. Hong Kong’s Hang Seng (.HSI), opens new tab rose 1.8% to its highest since October and an index of tech shares (.HSTECH), opens new tab stood near three-year highs.

Shares in Baidu (9888.HK), opens new tab steadied following their slide on Monday after the founder of the search engine giant was not spotted at the meeting. The company reports earnings later in the day. Alibaba (9988.HK), opens new tab is due to report later in the week.

BHP (BHP.AX), opens new tab shares ticked 0.6% higher after the global miner logged its lowest first-half profit in six years, but said it saw signs of economic recovery in China.

The imminent threat of reciprocal U.S. tariffs has receded until April, but the risk that they might include levies based on value-added taxes in other countries was a major worry.

The Financial Times reported on Sunday that the European Commission would explore tough import limits on certain foods made to different standards in an effort to protect its farmers, echoing U.S. President Donald Trump’s reciprocal trade policy.

The rest of the week is filled with key data releases, including February flash business activity data across the globe while in Europe, markets also have their eye on German elections this weekend.

The euro hovered just below $1.05 , while the yen was firm at 151.74 after solid growth data bolstered chances of a rate hike in Japan in coming months.

The pound traded at around $1.26033 , just below its highest level in two months, as investors looked towards employment and inflation data later in the week.

In commodity markets, gold came off Friday’s record highs at $2,895 an ounce having rallied for seven weeks straight.

Oil producer group OPEC+ is considering pushing back a series of monthly supply increases due to begin in April despite calls from Trump to lower prices, Bloomberg News reported on Monday, citing delegates.

Brent held overnight gains at $75.42 a barrel.