European stocks close at record high, led by defence shares

March 3 (Reuters) – Defence stocks powered European shares to a record high on Monday, after expectations mounted of higher military spending in the region, and the prospect of a Ukraine peace proposal boosted sentiment. Germany’s blue-chip index (.GDAXI), opens new tab logged its biggest one-day jump since November 2022, and closed at a record high, alongside Britain’s benchmark index (.FTSE), opens new tab. The pan-European STOXX 600 index (.STOXX), opens new tab closed up 1.1%, at a record high, building on 10 straight weeks of gains. Leaders from major European economies agreed, over the weekend, to boost defence spending to show U.S. President Donald Trump that the continent could protect itself. Britain said there were several possible proposals for a Ukraine ceasefire after last week’s Oval Office rupture between U.S. President Donald Trump and Ukrainian President Volodymyr Zelenskiy. Rheinmetall (RHMG.DE), opens new tab surged 13.7% to a record high, while Italy’s Leonardo (LDOF.MI), opens new tab advanced 16%. Britain’s BAE Systems (BAES.L), opens new tab was up 14.5%. France’s Thales (TCFP.PA), opens new tab and Dassault Aviation (AM.PA), opens new tab were up 16% and 14%, respectively. The European aerospace and defence index (.SXPARO), opens new tab climbed 7.7% to a record high, while the industrial goods and services sector (.SXNP), opens new tab gained 2.5%. A Reuters report that said parties in talks to form Germany’s new government were considering setting up a defence fund also boosted sentiment towards the defence companies. “While hopes of a Ukraine peace plan 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 Chris Beauchamp, chief market analyst at trading platform IG. “However, the problem is, as with all these euphoric surges, that it may take some time for it to fully develop… With European defence, it’s a question of seeing how this translates into actual funding.” Germany’s 10-year Bund yield , the euro zone benchmark, rose to 2.49%, pressuring rate-sensitive real estate (.SX86P), opens new tab and utilities (.SX6P), opens new tab, which were the top sectors in the red. Meanwhile, data showed Euro zone inflation dipped less than expected last month, but its most closely watched element dropped, sealing the case for another ECB interest rate cut on Thursday and for further policy easing in the coming months. The focus, however, will be on the central bank’s stance on U.S. plans for “reciprocal” tariffs on the European Union, as Trump’s deadline for tariffs on Canada and Mexico, and a further 10% duty on China looms Bunzl (BNZL.L), opens new tab fell 8.8% after the business supplies distributor reported a fall in annual profit.