European markets started the week on an optimistic note on Monday, with Britain’s FTSE 100 index up around 0.9%, and the STOXX 600 index 1.3% higher. Germany’s DAX rose around 3% on Monday, with France’s CAC 40 index inching up around 1.6% in the afternoon.
The rally followed a heated argument between US president Donald Trump and Ukrainian president Volodymyr Zelenskyy on Friday in the White House’s Oval Office.
The US leader is pushing for a swift end to the war, while Zelenskyy fears that a ceasefire without US security guarantees could leave his country exposed.
The argument resulted in a planned rare earth minerals deal between the two nations remaining unsigned, while also casting doubt on the US’ intentions to continue helping Ukraine in its war with Russia.
“You either make a deal or we are out,” Trump told Zelenskyy, making it clear that Ukraine cannot rely on the US’ unwavering support.
Trump added in a post on his Truth Social Platform on Friday: “I have determined that President Zelenskyy is not ready for Peace if America is involved, because he feels our involvement gives him a big advantage in negotiations. I don’t want advantage, I want PEACE. He disrespected the United States of America in its cherished Oval Office. He can come back when he is ready for PEACE.”
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European support for Ukraine
Following the meeting in the Oval Office, European leaders held a summit in London on Sunday, led by French President Emmanuel Macron and UK Prime Minister Keir Starmer.
Starmer said Europe must do the “heavy lifting” with regards to defence spending in Ukraine, although called for “strong US backing”.
The prospect that Europe will work towards lifting its military spending is drawing investors to defence stocks.
French aerospace and defence company Thales saw its stock soar 15% on Monday afternoon, with Dassault Aviation SA jumping 16.7%.
Italian aerospace and defence company Leonardo saw its stock rise 14.9% on the Milan Stock Exchange on Monday afternoon as well, with Germany’s Rheinmetall AG rising 14.4% during the same period.
European bond yields also rose on Monday on the prospect of greater defence spending and a drop in inflation that was less dramatic than expected.
The benchmark 10-year German Bund was up around 0.13 percentage points at 2.5% on Monday afternoon.
Headline year-on-year inflation in the eurozone fell from 2.5% to 2.4% in February, higher than the forecasted 2.3%.
The euro also rallied on Monday afternoon, showing a roughly 1.2% rise, equal to $1.0495.