Military spending pushes European stock indices up, except for Spain
The rise in defense investments is stimulating the European stock market, but Spain is showing a decline. Investors are awaiting the ECB meeting amid positive economic data.
Photo: Anne Nygård, Unsplash
The stock indices of the largest European countries are showing strong growth at the beginning of the week, driven by a sharp rise in the share prices of defense industry companies. The Spanish market is an exception, showing a decline, reports "Interfax-Ukraine".
As of 11:46 Kyiv time, the pan-European Stoxx Europe 600 index had risen by 0.45% to 559.69 points. The British FTSE 100 added 0.41%, the German DAX gained 1.01%, the French CAC 40 increased by 0.48%, and the Italian FTSE MIB grew by 0.38%. Meanwhile, the Spanish IBEX 35 declined by 0.44%, becoming the only major European index to fall into the red zone.
The main driver of stock market growth has been the increase in military spending across Europe.
Over the weekend, leaders of major European countries and Canada met in London to discuss plans for expanding defense budgets.
According to European Commission President Ursula von der Leyen, the European Union intends to compensate for years of underfunding of the military and increase investments in the defense sector.
Against this backdrop, shares of Europe's largest defense companies are experiencing strong growth. Among the leaders are French fighter jet manufacturer Dassault Aviation (+14.5%), British BAE Systems (+14.1%), French Thales (+12.7%), German Rheinmetall (+12.1%), and Italian Leonardo (+11.1%). Swedish Saab AB increased by 10.5%, and British QinetiQ rose by 9.1%.
German company Hensoldt, which specializes in radar and optical sensors for military aircraft and submarines, demonstrated particularly strong growth, with its shares soaring by 23.8%.
Stock market growth is also supported by business activity statistics.
The composite Purchasing Managers' Index (PMI) for the eurozone rose to 47.6 points in February from 46.6 points in January.
Despite the improvement, the index remains below the 50-point mark, indicating an ongoing slowdown. In Germany, PMI reached 46.5 points, in France – 45.8, and in Italy – 47.4.
The only country where the index declined was Spain, dropping to 49.7 points from 50.9 in January.
As investors await the European Central Bank meeting scheduled for Thursday, they continue to assess the impact of increased defense spending on the region's economy.
Experts anticipate that the regulator will keep interest rates unchanged, considering the unstable macroeconomic conditions.
Among the market losers were British outsourcing company Bunzl (-5.3%), retailer Ocado Group (-4.8%), measuring equipment manufacturer Spectris (-3.3%), and Swedish holding Vonovia (-3.2%).
The shares of major European oil companies showed a mostly positive trend: Equinor rose by 1.2%, Shell by 0.9%, and TotalEnergies by 1%. Meanwhile, BP Plc shares fell by 0.2%.
European stock markets continue to react to changes in defense policies, while investors remain cautious ahead of the ECB meeting.