Europe close: Indices push higher as defence issues fly
By Alexander Bueso
Date: Monday 03 Mar 2025
(Sharecast News) - Shares in weapons makers surged on Monday on the prospect of higher military spending in Europe.
"While hopes of a Ukraine peace plan do continue to play some part in today's positive market action, it is the expectation of rearmament across Europe that is the most important driver," said IG chief market analyst Chris Beauchamp.
"This will mark the most significant reorientation of European economies since the end of the Cold War, and promises to see the infusion of cash into defence and related stocks. Bond yields have risen however, a sign that investors remain nervous about the impact on government spending and on inflation."
The pan-European Stoxx 600 index was up 1.07% to hit 563.13 - a fresh high - with all regional bourses powering ahead.
Germany's Dax outperformed by a wide margin, running up by 2.64% to 23,147.02.
France's Dassault Aviation soared 15% on the sentiment, while Germany's Rheinmetall and Britain's BAE were further lifted by price target upgrades out of JP Morgan.
Saab, Qinetiq, Leonardo, Thales and Rolls-Royce also made hefty gains.
UK Prime Minister, Keir Starmer, hosted a summit of European leaders over the weekend, following a failed meeting between Presidents Trump and Zelensky.
The assembled leaders reaffirmed their support for Ukraine, with the UK committing to increasing defence spending as a share of GDP over the coming years at the expense of a hefty cut to the country's aid and development budget.
There were also reports that the parties in talks to form the next German government were proposing special funds for both defence and infrastructure - with the former potentially unlocking €400bn in spending - to get around the country's so-called constitutional "debt brake" which limits borrowing as a share of GDP.
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