European stocks edged higher on Tuesday, extending gains into a second session, with the STOXX 50 up 0.2% and the STOXX 600 advancing 0.5%. Investors weighed a fresh round of corporate news while keeping a close watch on France’s deepening political turmoil, after yet another prime minister lost a confidence vote on Monday, which will force President Macron to appoint the country’s fifth PM in less than two years. Markets also face a heavy week of economic events, including the ECB’s policy decision, US inflation data, and revisions to payrolls. On the corporate front, Novartis (-0.4%) agreed to acquire biopharmaceutical group Tourmaline Bio, Anglo American (+5.5%) reached a merger deal with Canada’s Teck Resources, and Monte dei Paschi di Siena (+4.5%) secured a 62% stake in Mediobanca (+4.3%).

The Nikkei 225 Index fell 0.42% to 43,459 while the broader Topix Index lost 0.51% to 3,122 on Tuesday, as Japanese equities retreated from record highs amid profit-taking. Investors also weighed the political fallout from Prime Minister Shigeru Ishiba’s resignation, which followed deepening rifts within the ruling party and pressure from his national election defeat late last year. The leadership shakeup came as Japan faced hurdles in trade talks with the US, even after both sides finalized a deal last week that cut US tariffs on Japanese autos from 27.5% to 15% and allowed US-made cars to enter Japan without additional testing. Among individual names, notable declines were seen in SoftBank Group (-4.4%), Fujikura (-4.8%), Sanrio (-2.1%), Mitsubishi UFJ (-1.1%), and Toyota Motor (-0.7%).

The dollar index steadied at 97.4 on Tuesday, lingering near its weakest level in almost seven weeks as mounting concerns over a cooling labor market strengthened expectations for Federal Reserve rate cuts. Investors awaited US benchmark revisions for employment covering April 2024 to March 2025, with economists projecting downward adjustments of up to 800,000 jobs, a signal the Fed may be lagging in its mandate to maximize employment. Attention also turned to two key inflation reports due this week that could shape the next policy decision, with the August producer price index out Wednesday and the consumer price index on Thursday. Markets currently see an 89% chance of a 25 basis point cut at next week’s meeting, while some participants are positioning for a larger 50 basis point move.

WTI crude oil futures climbed above $62 per barrel on Tuesday, extending gains from the prior session, following OPEC+'s modest output hike and due to concerns over potential new sanctions on Russian oil. OPEC+ agreed on Sunday to raise its crude production by 137,000 bpd from October, much lower than previous monthly hikes of about 555,000 bpd for September and August and 411,000 bpd in July and June. The smaller increase highlights the group’s cautious stance as the market heads into an expected surplus. Meanwhile, US President Donald Trump said on Sunday he was ready to move to the second phase of restrictions against Russia after its heaviest aerial strikes on Ukraine since the war began, fueling worries about disruptions to global energy flows. However, gains in oil prices were limited after Saudi Arabia, the world’s largest crude exporter, lowered the price for all its crude grades to Asian buyers for delivery in October, signaling weaker demand.

Australia’s Westpac-Melbourne Institute Consumer Sentiment Index dropped 3.1% mom to 95.4 in September 2025, reversing August’s 5.7% gain when the index reached 98.5, the highest in 3-1/2 years. The decline reflected renewed concern over the interest rate outlook, even as the cost-of-living crisis eases and monetary loosening provides some support. Views on the economy weakened, with the 12-month outlook down 8.9% to 92.2 and the 5-year outlook 5.9% lower at 92.7. The time to buy a major household item index fell 3.4% to 98.2, while unemployment expectations rose 4.6% to 131.4, above the long-run average of 129. Still, family finances improved modestly: compared with a year ago, the index rose 2.6% to 86.3, while expectations for the next 12 months edged up 0.9% to 107.7. Mathew Hassan, Head of Australian Macro-Forecasting, said the survey shows recovery since mid-2024 remains slow, with further easing likely. He expects the RBA to cut rates by 25bps in November and twice more in 2026.

UK retail sales rose 2.9% year-on-year on a like-for-like basis in August 2025, accelerating from July’s 1.8% gain and beating market forecasts of 2%. This marked the strongest growth in four months, supported by warmer weather that boosted demand for food, furniture and back-to-school goods. However, much of the rise reflected higher food prices rather than stronger volumes. Food sales jumped 4.7% compared with a 1.8% increase for non-food categories, highlighting the continued impact of inflation on household spending patterns. Online sales also gained modestly, suggesting consumers remain cautious in discretionary purchases. The BRC noted that while August’s figures were encouraging, retailers are still wary of subdued consumer confidence ahead of the key Christmas trading period. The sector faces ongoing challenges from elevated borrowing costs, higher energy bills, and uncertainty over the government’s upcoming November budget.