European shares reach record highs on Ukraine peace hopes

European share markets hit record peaks on Tuesday as defence stocks soared on expectations of a spending bump.

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

S&P 500 futures were up 0.2% and European futures added 0.1%. 

On Monday, the pan-European STOXX 600 index tab closed 0.5% higher as a gauge of defence and aerospace stocks 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, reckoning a long era of modest defence budgets has ended and a rush to buy arms is beginning.

"If European defence spending gets anywhere near Trump's 5% of GDP target, European defence companies like Rheinmetall, SAAB, BAE Systems, Thyssenkrupp, and Thales can extend considerably their overnight gains," said Tony Sycamore, analyst at IG Markets in Sydney.

The euro hovered around $1.0455 in the Asia session, though Sycamore said a sustained break of $1.0530 would open the way to $1.06 and beyond ahead of Germany's weekend election.

Russian and U.S. officials are scheduled to meet for bilateral talks on Tuesday in Saudi Arabia. Ukraine's President Volodymyr Zelenskiy has said the country would not recognise any decisions made in deliberations where they were not present.

The pound traded at around $1.2597 , 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 $2,913 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 $75.39 a barrel.