(Bloomberg) — The euro gained and defense stocks rallied as a concerted push by European leaders fueled bets on a wave of military spending.
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The Stoxx 600 index posted small moves as defense stocks soared, with BAE Systems Plc jumping 13%, Rheinmetall AG up 16% and Saab AB adding 11%. The common currency rose 0.2% against the dollar, outperforming major peers.
Bitcoin retreated, trimming a Sunday rally spurred by President Donald Trump’s comments on a strategic crypto reserve.
Markets are starting the week with geopolitics dominating as European leaders assemble what Britain called a “coalition of the willing” to secure Ukraine following an Oval Office clash between Trump and Ukrainian President Volodymyr Zelenskiy. China is also due to stage its biggest political huddle of the year just as US tariffs threaten to test Beijing’s ability to boost economic momentum.
“The US turnaround is certainly a historic opportunity for Europe to tackle the subject of an autonomous European defense with potentially very positive economic ramifications,” said Christopher Dembik, senior investment manager at Pictet Asset Management. “But beware of excessive optimism.”
German and French bonds dropped amid concern about rising debt issuance by the bloc. S&P Global Ratings has put a negative outlook on its assessment of France’s creditworthiness.
The yield on 10-year US Treasuries climbed three basis points, while stocks futures were little changed.
Meanwhile, investors are bracing for news of any last minute negotiations to avoid a further increase in US trade tariffs on Chinese goods that are due to come into effect this week along with levies on Mexico and Canada.
The long-promised tariffs scheduled to take effect Tuesday would easily be among the most sweeping of the Trump era, applying to roughly $1.5 trillion in annual imports. They would put a 25% tariff on all imports from Canada and Mexico, except Canadian energy, which would face a 10% rate. He has also said he’ll double a tariff on China to 20%.
Oil rose on Monday on speculation the Trump-Zelenskiy row likely means that achieving a solution agreed upon by all parties — and therefore an easing of sanctions — will be harder. Gold also gained.
