Defense Stocks Boost European Markets Amid EU Retaliation to Trump Tariffs

European markets saw broad gains on Wednesday, as investors reacted positively to the European Union’s announcement of retaliatory tariffs on U.S. steel and aluminum imports. The Stoxx 600 index rose 0.8%, with German stocks leading the charge. The DAX index surged 1.5%, while other major European bourses also posted gains. However, the retail sector was hit hard, with the Stoxx Europe Retail Index falling by 3.1%, largely due to poor results from Spanish fashion giant Inditex, which reported a slowdown in sales.

A standout performer in the market was Zealand Pharma, whose shares surged by 24% after announcing a partnership with Swiss company Roche to co-develop an obesity drug. This news helped to boost market sentiment as investors also kept an eye on broader geopolitical developments. Talks between U.S. and Ukrainian officials resulted in an agreement for a 30-day ceasefire, which helped stabilize the market further and boosted optimism.

Meanwhile, defense stocks continued their impressive rally, with the Stoxx Europe Aerospace and Defense Index rising 2.2%. German defense manufacturer Rheinmetall led the way, with a 7% increase in share price after it reported record profits for 2024 and forecasted a 40% surge in defense sales this year. Other defense companies such as Melrose Industries, Lisi, and Hensoldt also posted strong gains, benefiting from rising geopolitical tensions and increased military spending.

In other news, U.S. President Donald Trump’s 25% tariffs on steel and aluminum imports were officially implemented, contributing to market uncertainty, particularly in the global trading environment. Markets remained focused on upcoming U.S. inflation data, which could further influence sentiment in the days to come. As markets reacted to these developments, a two-day business and political event in Singapore, featuring influential leaders, was also generating interest among investors.

SOURCE: CNBC