European stocks are expected to open lower on Tuesday (December 16), reversing gains seen earlier in the week.

Shortly after the opening bell, the pan-European Stoxx 600 index fell 0.2%, 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 is willing to give up its NATO membership ambitions to secure a deal to end the war.

Meanwhile, US President Donald Trump told reporters on Monday that after "long and very good talks" with European leaders, negotiators are "now closer than ever" to ending the conflict.

The Stoxx Europe Aerospace and Defense sector was last seen trading down 1.5%, with shares of Sweden's Saab down 4%. Shares in Germany's Rheinmetall and Renk, down 3.6% and 3.5% respectively, were also among the biggest losers in Europe on Tuesday.

Investors in Europe are also bracing for a busy week of central bank action.

The European Central Bank's (ECB) final policy meeting of the year takes place on Thursday, and although the bank is expected to keep interest rates at 2%, ECB President Christine Lagarde said the central bank is likely to raise its growth forecasts again in December, after raising its annual GDP growth forecast to 1.2% in September.

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

In the UK, data from the Office for National Statistics published on Tuesday showed that the country's unemployment rate rose slightly to 5.1% in the three months to October, as businesses await the crucial Autumn Budget. The figures put the UK unemployment rate at its highest level since the three months to January 2021. Tuesday's forecast also showed the number of registered employees falling by 0.5%, or 149,000, in the year to October.

Yields on UK government bonds, known as gilts, remained flat following the ONS labor market update, while the British pound was little changed against the US dollar and the euro.

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

"The alarming pace at which the labor market is deteriorating means that a rate cut on Thursday seems inevitable as these figures will undoubtedly exacerbate concerns about the strength of the economy," he said.

Eurozone and UK inflation figures are also due on Wednesday, which could also influence monetary policy decisions.

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

Asia-Pacific markets fell across the board overnight, tracking Wall Street's decline as investors continued to shift away from artificial intelligence trading.

In the United States, stock futures traded near flat on Monday evening as traders anticipated the release of the November jobs report.

Economists surveyed by Dow Jones expect non-farm payrolls to increase by 50,000, down sharply from the 119,000 jobs added in September. They also expect the unemployment rate to reach 4.5%, compared with 4.4% in September. The October retail sales report will also be released. (alg)

Source: CNBC.com