Arms stocks were among the big winners as Russian and U.S officials began negotiations in Saudia Arabia
European stocks soared to all-time highs on Tuesday amid expectations that leaders will ramp up defense spending as part of ongoing negotiations for peace in Ukraine.
The peace process was described in a Euronews report on Tuesday afternoon as having made “positive” progress, with U.S and Russian officials seeking to “normalise” the relationship between the two nations as talks began in Riyadh.
The European STOXX 600 index hit a record high of 556.81 on Tuesday morning in anticipation of the talks commencing.
Crucially, Ukraine and other key European nations have thus far been excluded from the peace talks, prompting concerns that the U.S and Russia will strike a deal that compromises Ukraine’s security.
Arms stocks exploding
As a result, European leaders including UK Prime Minister Kier Starmer have pledged to increase defence spending.
“This isn’t just about the frontline in Ukraine. It’s the frontline of Europe and of the UK. It’s about our national security,” Starmer told The Guardian before heading to Paris on Tuesday afternoon to hold emergency talks with European leaders regarding their role in Ukraine’s future.
Similarly, a spokesperson for the German government declared on Monday that the nation “will not shy away” from putting troops on the ground in Ukraine, while Swedish Prime Minister Ulf Kristersson confirmed there was “absolutely a possibility” of sending peacekeepers into the region if a clear mandate called for it.
Poland, NATO’s third largest military force, has said it would continue to provide “organization, finance, humanitarian aid and military assistance”, but has no intention of putting troops on the ground in Ukraine.
Traders have been quick to respond to the pledges. For instance, BAE Systems’ shares were up close to 8% in late trading, while German arms manufacturer Rheinmetall soared to an all-time high, adding 10% to its value.
The run on defense stocks culminated in Europe’s defense and aerospace index surging by 4% on Tuesday, hitting an all-time high of its own.
But it wasn’t all good fortune for the European financial markets, with prices for Italian, German, and French bonds all declining.
