European defense stocks extend rally amid geopolitical tensions; Leonardo jumps 4%

European defense stocks extended their rally on Thursday as investors reacted to rising geopolitical tensions and fresh signals from U.S. President Donald Trump calling for a sharp increase in American military spending. While broader European markets opened in negative territory, defense shares bucked the trend, reflecting growing expectations of higher global defense budgets amid mounting political uncertainty.

The pan-European Stoxx Europe 600 was down about 0.2% in early London trading, with losses across several major indices. France’s CAC 40 slipped slightly, while the UK’s FTSE 100 also edged lower. Germany’s DAX and Italy’s FTSE MIB managed modest gains, highlighting a mixed market mood as investors weighed geopolitical risks against slowing momentum in other sectors.

Defense stocks, however, stood out. The Stoxx Europe Aerospace and Defense index climbed 1.4%, putting the sector on track for a fifth straight day of gains. Italy’s Leonardo surged nearly 4%, while Germany’s Rheinmetall rose over 2% and Renk added close to 2%, after Trump said he wants to raise the U.S. military budget by 50% to $1.5 trillion by 2027. In a late-night post, Trump said the increase was necessary to ensure national security “in these very troubled and dangerous times.”

Markets have been on edge this week following a string of geopolitical developments, including the U.S.-backed removal of Venezuelan President Nicolas Maduro and renewed threats by Trump to seize Greenland. European leaders have pushed back against the Greenland rhetoric, while U.S. Secretary of State Marco Rubio is expected to meet Danish officials next week, downplaying the prospect of military action.

Elsewhere, European oil stocks extended losses for a second session as speculation grew that U.S. companies could gain access to Venezuelan oil supplies. Brent crude briefly dipped below $60 a barrel before rebounding slightly. Global markets remained cautious, with Wall Street closing lower overnight and investors now awaiting a key Supreme Court ruling on the legality of Trump-era tariffs, a decision that could inject fresh volatility into markets.

source: cnbc