Germany's DAX at record high as U.S.-EU trade tensions ease; Euro falls

European stocks closed broadly higher on Tuesday, rounding off a calmer session following recent market rumbles.

The pan-European Stoxx 600 index finished 0.33% higher as expectations built that eye-watering 50% U.S. tariffs on the European Union — threatened by U.S. President Donald Trump on Friday last week — will be averted by a trade deal.

Germany's DAX index closed 0.83% higher at 24,226.49 points, surpassing its record closing high set last Wednesday.

Defense stocks including Hensoldt were among the best performers Tuesday, with fighting raging in the ongoing Russia-Ukraine war and Trump trading barbs with Russian officials, dampening hopes of a ceasefire. The European Union, meanwhile, signed off a previously announced 150 billion euro ($170 billion) arms fund aiming to boost regional security.

Attention was also on the bond market following last week's global sell-off. Government bond yields dipped in the U.S. and across most of Europe — a sign of higher prices and demand — after Reuters reported Japan may cut its issuance of longer-dated debt in response to rising borrowing costs. A lower supply of Japanese government bonds could push investors into other markets.