As the region’s top political leaders demanded an emergency summit on the situation in Ukraine amid mounting requests from the United States to increase military spending for security, European markets, headed by defence stocks, surged to record highs on Monday.
As a measure of defence and aerospace firms (.SXPARO), which has already more than doubled in value since Russia invaded Ukraine three years ago, the pan-European STOXX 600 index (.STOXX), opened new tab, soared as high as 0.4%.
Analysts have labelled this a “supercycle” for the industry, and investors anticipate that revenues will continue to rise sharply due to a large increase in defence budgets to fulfil new security requirements.
Bruno Schneller, managing director at Erlen Capital Management, stated that “a resolution to the conflict in Ukraine could deliver positive growth impulses for Europe, including improved consumer confidence, lower energy prices, and easier financial conditions.
French President Emmanuel Macron will hold an emergency conference on Ukraine on Monday, following U.S. officials’ suggestion that Europe would not participate in any conflict-ending negotiations this week in Saudi Arabia.
Although the immediate prospect of reciprocal U.S. tariffs has subsided until April, there was significant concern that they would incorporate charges based on value-added taxes in other nations.
With the possibility of more tariffs and their effects on economy and inflation, trade policy is still a wild card. Although the economic environment has not yet been significantly changed by the proposed tariffs, Schneller continued, “further escalation could introduce new uncertainties.
