European stocks opened cautiously higher Tuesday as investors weighed potential progress in Russia-Ukraine peace talks ahead of the Federal Reserve’s key Jackson Hole symposium. The pan-European STOXX 600 rose 0.1%, with France’s CAC 40 gaining 0.2% and Germany’s DAX up 0.1%, while defense stocks fell 1.3% on reduced geopolitical tensions.

The modest gains followed Ukrainian President Zelenskiy’s suggestion that security guarantees could be finalized within 10 days after discussions with U.S. President Trump and European leaders. This comes after Trump’s Alaska summit with Putin failed to produce a ceasefire agreement, though plans for a potential trilateral meeting are now being discussed.

Market attention remains divided between geopolitical developments and monetary policy expectations. Analysts note traders are pricing in a dovish shift from the Fed, with Capital.com’s Kyle Rodda warning equity gains and dollar weakness depend on whether Chair Powell meets these expectations at Jackson Hole.

Oil prices declined on the diplomatic developments, while the euro strengthened slightly against the dollar. The muted trading session reflects market caution ahead of Powell’s Friday speech, which could provide critical clues about the Fed’s rate path amid conflicting economic signals.

Defense contractors underperformed, with Sweden’s Saab dropping 3.7%, as reduced war risks tempered sector demand. Investors now await concrete outcomes from both the diplomatic track and central bank guidance to determine near-term market direction.

Source: Reuters.