LONDON - European shares rose to record levels on Monday, led by defense stocks, as the region’s political leaders called for an emergency summit on the Ukraine war amid growing U.S. calls to boost military spending for security.
The pan-European STOXX 600 index .STOXXwas last up 0.4%, as a gauge of defense and aerospace stocks .SXPARO surged almost 4% 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, driven by a significant surge in defense budgets to meet new security needs - which analysts have dubbed a “supercycle” for the sector.
“A resolution to the conflict in Ukraine could deliver positive growth impulses for Europe, including improved consumer confidence, lower energy prices, and easier financial conditions,” Bruno Schneller, managing director at Erlen Capital Management.
Banks .SX7P were also in demand, up 1.2% and flying to 17-year highs, helped by a rise in bond yields.
French President Emmanuel Macron on Mondayhosted an emergency summit on Ukraine after U.S. officials suggested Europe would have no role in any talks this week in Saudi Arabia aimed at ending the conflict.
Britain said it was ready to send peacekeeping troops to back up any deal, while Russian and U.S. officials prepared to meet for their own competing talks on Tuesday in Saudi Arabia. Ukraine’s President Volodymyr Zelenskiy said on Monday that the country would not recognize any decisions made in deliberations where they were not present.
Delayed threats
The imminent threat of reciprocal U.S. tariffs has receded until April, but the risk that they might include levies based on value added taxes in other countries was a major worry.
“Trade policy remains a wildcard, with the potential for incremental tariffs and their impact on inflation and growth. While the announced tariffs have not yet materially altered the economic landscape, further escalation could introduce new uncertainties,” Schneller added.
The Financial Times reported on Sunday that the European Commission would explore tough import limits on certain foods made to different standards in an effort to protect its farmers, echoing U.S. President Donald Trump’s reciprocal trade policy.
U.S. markets are shut on Monday for the Presidents Day holiday, keeping trading volumes lighter than usual, though the S&P 500 futures ESc1 and Nasdaq futures NQc1 rose 0.2%.
S&P 500 ended Friday up 1.5% on the week, while the Nasdaq gained 2.6%. .N
The week ahead is filled with key data releases, including February flash business activity data across the globe while in Europe, markets also have their eye on German elections this weekend.
The euro was little ticked down 0.2% around $1.05 EUR=EBS, while the dollar slipped almost 0.6% to 151.46 yen JPY=EBS.,
The pound held steady at around $1.2593 GBP=D3, just below its highest level in two months, as investors looked towards employment and inflation data later in the week.
Central banks in Australia and New Zealand are both expected to cut interest rates at policy meetings this week.
In commodity markets, gold came off Friday’s record highs at $2,899 an ounce XAU= 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. O/R
Brent LCOc1 rose 9 cents to $74.82 a barrel, while U.S. crude CLc1 gained 13 cents to $70.87 per barrel.
Reporting by Nell Mackenzie; Editing by Ed Osmond and Angus MacSwan.
