European markets experienced a mixed performance on Monday as defense shares surged following security discussions among regional leaders, which highlighted increased military spending. The Stoxx 600 index edged down by 0.15% by 8:30 a.m. in London. However, the Stoxx Europe aerospace and defense index jumped 7.5%. Notable gainers included Germany’s Rheinmetall, which rose 12%, and Britain’s BAE Systems, climbing 17%. JP Morgan analysts raised their price targets for both companies.
Sweden’s Saab, Italy’s Leonardo, and France’s Thales each gained over 10%. Rolls-Royce, involved in both defense and commercial aerospace, added another 4% after reaching an all-time high last week due to reinstating its dividend.
British Prime Minister Keir Starmer hosted European leaders over the weekend. During these discussions, Starmer emphasized the need for Ukraine’s allies to maintain their support, following a significant meeting between U.S. President Trump and Ukrainian President Volodymyr Zelenskyy. The U.K. recently pledged to boost its defense spending as a percentage of GDP, a sentiment shared by other summit participants.
According to a Reuters report, parties likely to form the next German government are considering establishing special funds for defense and infrastructure, potentially unlocking €400 billion ($416 billion) for defense. Robin Winkler, chief Germany economist at Deutsche Bank, described this potential move as a historic fiscal shift.
Market attention is also on preliminary euro zone inflation data for February, ahead of a European Central Bank interest rate decision on Thursday. Meanwhile, U.S. stock futures inched up, and Asia-Pacific markets mostly gained overnight as traders awaited clarity on President Donald Trump’s tariff plans. U.S. Commerce Secretary Howard Lutnick indicated that the tariff rates for Mexico and Canada remain uncertain and could be lower than the proposed 25%. He confirmed an additional 10% duty on China imports. — news from CNBC