European defence shares have surged to record highs as investors bet on increased government spending and a boost in security. The Stoxx Europe aerospace and defence index jumped 8% on Monday, its biggest one-day gain since November 2020. Shares in major defence contractors such as Rheinmetall, Leonardo, Thales, BAE Systems, and Saab also saw significant gains.
The rally comes after European leaders discussed boosting defence spending at a summit in London, amid growing pressure to counter Russian aggression. The Trump administration’s refusal to offer US security guarantees has fuelled concerns about the need for European nations to increase their own military capabilities.
Eurozone bond yields rose, driven by expectations of higher issuance and a steepening yield curve. The euro also climbed 1.2% to trade at $1.046, following reports that Ukrainian President Volodymyr Zelenskyy had expressed willingness to meet with US President Donald Trump again for “serious talks”.
The sector’s record-breaking run adds to the momentum of a broader European market rally. However, some analysts caution that the initial gains may be short-lived due to Europe’s slow fiscal policy and spread-out spending plans.
Source: https://www.ft.com/content/bbe9ec5a-9701-4d42-904a-52f021ccb0a2