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Benchmark S&P 500 reaches all-time high

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European stocks touch record highs, defence stocks rally

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Euro zone borrowing costs rise on spending boost

expectations

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Gold gains, Brent crude settles higher

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Investors wait on U.S-Russia talks

(Updates prices throughout with U.S. markets close, oil and

gold settlement)

By Chibuike Oguh and Naomi Rovnick

NEW YORK/LONDON, Feb 18 (Reuters) - Global equity

markets rose on Tuesday, with both the S&P 500 and European

shares ending at record highs, as markets digested strong U.S.

earnings, trade tariffs and a big European defence spending

hike.

The benchmark S&P 500 squeaked past its previous record

closing high at the top of a holiday-shortened week. All three

Wall Street indexes wobbled between red and green for much of

the session, but managed to rise in the closing minutes.

European shares ended at a record high, with banking and

defence stocks among the top gainers. The pan-European STOXX 600

index hit an all-time high of 557.96.

On Wall Street, all three indexes finished higher after

paring losses. Industrials, consumer discretionary, energy,

utilities, consumer staples, and financial stocks were the

biggest gainers while technology was the main drag.

The Dow Jones Industrial Average rose 0.02% to

44,556.34, the S&P 500 rose 0.24% to 6,129.58 and the

Nasdaq Composite rose 0.07% to 20,041.26.

"I think people are still trying to digest everything going

on with not only tariffs and how that could impact things but

also general valuations," said Sandy Villere, portfolio manager

at Villere & Co in New Orleans. "We feel like the market is

pretty expensive."

China's stock rally cheering Monday's rare meeting between

President Xi Jinping and domestic business leaders also boosted

risk-taking appetite.

European leaders vowed to step up support for Ukraine if

U.S.-Russia talks this week lead to a hasty peace deal that

compromises Europe's security.

Investors also hope this weekend's German election will lead

to economic stimulus. Expectations for higher government

spending lifted Germany's benchmark 10-year bond yield

to 2.51%, near its highest level of the month.

"That means massive fiscal transformation in Europe," said

John Hardy, global head of macro strategy at Saxo Bank in

Denmark. He expected Europe's STOXX index to outperform Wall

Street this year, meanwhile, as investors also fretted about

U.S. trade tariffs, inflation and highly valued tech stocks.

Europe's stock indices are dominated by industrial groups,

energy producers and banks and attracted their biggest weekly

investment inflow last week since January 2023, Bank of America ( BAC )

said.

Key measures of U.S. inflation are also running at a half

percentage point or more above the Fed's goal, with some of its

officials arguing to delay rate cuts.

Minutes from the Fed's January meeting, at which the U.S.

central bank held borrowing costs at 4.25% to 4.5%, are due on

Wednesday. That follows hawkish comments from Fed Chair Jerome

Powell in testimony to Congress last week and hot consumer

prices data.

The benchmark U.S. 10-year note yield rose 7.8

basis points to 4.554%.

"You've got not only the tariff situation, which I think is

going to be more sabre-rattling and negotiating than anything

long-term; the other thing is inflation that could be a little

more stubborn than people think and I don't think the Fed can

cut interest rates as fast as originally expected," Villere

said.

The dollar advanced against major currencies, with losses

led by the euro, garnering safe-haven bids amid tariff concerns

and peace negotiations on the Russia-Ukraine conflict.

The dollar strengthened 0.35% to 152.03 against the

Japanese yen. Against the Swiss franc, the

dollar strengthened 0.28% to 0.903.

The dollar index, which measures the greenback

against a basket of currencies including the yen and the euro,

rose 0.28% to 107.02, with the euro down 0.31% at

$1.0449.

The Australian dollar weakened 0.08% versus the

greenback to $0.63515, having been spared blows from the central

bank's first rate cut since 2020 on Tuesday as policymakers

delivered it with caution about prospects of further easing.

Brent crude oil settled up 0.82% at $75.84 a barrel

as traders awaited the outcome of the U.S.-Russia talks in

Riyadh and speculated about potential supply increases if

Washington agrees to abandon sanctions on Russian oil.

Spot gold rose 1.23% to $2,933.37 an ounce. U.S. gold

futures settled 1.7% higher at $2,949.