LONDON :European shares rose to record levels on Monday, led by defence 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 was last up 0.4 per cent, as a gauge of defence and aerospace stocks surged almost 4 per cent 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 defence 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 were also in demand, up 1.2 per cent and flying to 17-year highs, helped by a rise in bond yields.
French President Emmanuel Macron on Monday hosted 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 recognise 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 and Nasdaq futures rose 0.2 per cent.
S&P 500 ended Friday up 1.5 per cent on the week, while the Nasdaq gained 2.6 per cent.
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 per cent around $1.05, while the dollar slipped almost 0.6 per cent to 151.46 yen.,
The pound held steady at around $1.2593 , 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 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 rose 9 cents to $74.82 a barrel, while U.S. crude gained 13 cents to $70.87 per barrel.
Source: CNA
