LONDON (March 18): European markets held firm on Tuesday ahead of German lawmakers voting on a landmark overhaul to government spending, while uncertainty over a call on Ukraine between US President Donald Trump and Russia's Vladimir Putin kept gold at US$3,000 an ounce.

This month has brought a huge divergence between the performance of US stocks and those elsewhere, particularly in Europe and China, where markets have seen a surge in inflows from investors that have cashed in on Wall Street's sky-high valuations.

Trump's erratic approach to trade policy, coupled with his mass firings of federal employees, has stirred up uncertainty for companies, households and investors and US economic data is starting to reflect that.

Europe's STOXX 600, which on Tuesday was up 0.5%, has risen by 8% this year, compared with a 4% drop in the S&P 500, marking the biggest outperformance in European stocks against the US index in the first 12 weeks of the year in a decade.

The euro, meanwhile, rose further above US$1.09 to its highest since early October, supported by this month's steep rise in German bond yields.

Germany's lower house of parliament votes later on Tuesday on a massive surge in borrowing that could boost Europe's largest economy and stimulate growth across the region, a key factor in the euro's recent strength.

"History will be made today when the Bundestag approves a change to the constitution, abandoning the fiscal stance Germany has always been known for," Commerzbank chief rates strategist Christoph Rieger said.

German 10-year government bonds were last at 2.843%, up four basis points on the day and up 45 bps this month.

The prospect of a ceasefire and eventual peace in Ukraine has helped shore up sentiment in Europe in recent weeks. A scheduled call between Trump and Putin later on Tuesday to discuss steps to end the conflict could cover territorial concessions by Kyiv and control of a nuclear power plant, which injected a degree of caution into markets.

Gold, which has roared above US$3,000 for the first time on record driven by safe-haven flows, held above this level on Tuesday, bringing gains for the year to 15%.

"In uncertain times, central banks and individuals demand gold, while inflation concerns emanating from President Trump’s tariffs and trade war are also boosting the price of gold. Life above US$3,000 per ounce could be the norm for the gold price in 2025," XTB research director Kathleen Brooks said.

Asian stock markets also got a bump higher on Tuesday from stronger retail sales data from China the previous day, as well as from a series of steps aimed at revitalising domestic consumption in the world's second-largest economy.

Hong Kong shares hit a three-year peak, while Japan's Nikkei bounced 1.5%, putting it on course for its sharpest rise in three weeks.

China has been an unlikely winner of Trump's burst of tariffs and cuts to government spending in his first two months in office, as fears of a US slowdown turn investors abroad.

"Momentum and sentiment are shifting now as well in a positive way," said Nick Ferres, chief investment officer at Vantage Point Asset Management in Singapore.

Trump said Chinese President Xi Jinping may visit the US in the not-too-distant future, further raising expectations that some sort of breakthrough deal could reduce tariffs.

US stock futures were mostly unchanged in Europe, following modest gains in the S&P 500 and the Nasdaq on Monday. But the mood on Wall Street remains fragile leading into April, when Trump's threatened reciprocal tariffs are set to take effect.

Softer-than-expected retail sales and factory activity figures kept downward pressure on the US dollar and on US yields.

Sterling rose 0.1% to US$1.300, hitting this milestone for the first time since the US election in early November. The Japanese yen was the outlier, weakening sharply to leave the dollar up 0.3% at 149.67.

Ten-year treasury yields were steady at 4.2908%.

A German economic survey is due later today, though markets' focus is on the US Federal Reserve, which concludes a two-day meeting on Wednesday.

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