European equities advanced on Monday, with defense stocks at the forefront of the rally as investors digested escalating geopolitical tensions. Fighting persists in Ukraine with no signs of peace, while Israel and Hamas continue to trade accusations of violating the Gaza ceasefire.
Sentiment was also buoyed by easing fears over the U.S. banking sector and growing expectations of a thaw in trade relations between the United States and China. U.S. President Donald Trump helped calm markets by signaling that the steep tariffs he had threatened on Chinese imports would be “not sustainable.” A new round of trade talks between the two countries is scheduled to take place this week.
Major indices across the region were in positive territory: Germany’s DAX Index climbed 1.2%, the U.K.’s FTSE 100 added 0.4%, while France’s CAC 40 hovered around the flat line.
Defense and Industrial Stocks Lead in London
In the U.K., Babcock International (LSE:BAB) was the top gainer, rising 3%. Other notable climbers included Prudential (LSE:PRU), Airtel Africa (LSE:AAF), St. James’s Place (LSE:STJ) and Rolls-Royce Holdings (LSE:RR.), all up between 2% and 2.5%. Gains of 1.5% to 1.8% were also seen in Melrose Industries (LSE:MRO), Weir Group (LSE:WEIR), Endeavour Mining (LSE:EDV), BAE Systems (LSE:BA.) and Smiths Group (LSE:SMIN).
On the downside, Pearson (LSE:PSON) dropped 2.7%, while WPP (LSE:WPP), Persimmon (LSE:PSN), Barratt Redrow (LSE:BTRW), EasyJet (LSE:EZJ), Metlen Energy & Metals (LSE:MTLN), Mondi (LSE:MNDI), Berkeley Group Holdings (LSE:BKG) and Marks & Spencer (LSE:MKS) declined between 1% and 2%.
Rheinmetall Rallies in Germany, BNP Paribas Slumps in France
In Germany, defense group Rheinmetall (TG:RHM) jumped 5.7%. Gains of 1.3% to 2.5% were also recorded by Infineon Technologies, Heidelberg Materials, Siemens Energy, SAP, Siemens, Daimler Truck Holding and Deutsche Bank. Meanwhile, Merck Group, Volkswagen Group, Zalando, Symrise, Vonovia and Mercedes-Benz Group lagged.
In France, Kering (EU:KER) surged 3.75% after agreeing to sell its beauty division to L’Oréal (EU:OR) for €4 billion, with L’Oréal shares ticking slightly higher. Thales Group climbed 3.6%, Safran added nearly 3%, and Airbus rose more than 1% after securing an order for 30 aircraft from IndiGo.
In stark contrast, BNP Paribas plunged 9% after a U.S. jury found the bank liable for supporting Sudan’s former regime, awarding three plaintiffs over $20 million in damages. Teleperformance lost 2.5%, while Credit Agricole and Societe Generale fell 1.4% and 1.3%, respectively.
Economic Data
On the macroeconomic front, data from Destatis showed German producer prices dropped 1.7% year-on-year in September, following a 2.2% decline in August. On a monthly basis, prices slipped 0.1%, compared to expectations of a 0.1% increase. This marked the seventh straight monthly decline in producer prices.
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