European Stocks Rise on Defence Rally, ECB Rate Stability

European stocks experienced gains driven by a rally in the aerospace and defence sector, fueled by increased geopolitical tensions following Poland shooting down a suspected Russian drone. The pan-European STOXX 600 index rose modestly, with defence stocks like BAE Systems and Rheinmetall showing significant gains amid these developments. Investors are also buoyed by expectations of an impending U.S. Federal Reserve interest rate cut next week, which supports optimism about the labor market and borrowing costs. Despite these gains, concerns remain over potential credit downgrades in France due to political instability, as President Emmanuel Macron appointed his fifth prime minister in two years. Meanwhile, broader market indicators reflected mixed sentiment, with U.S. futures down slightly and commodities such as crude oil declining due to weaker demand signals. Overall, the market mood is cautiously optimistic, balancing geopolitical risks with hopes for monetary easing and economic support.