European defense stocks rallied sharply as threats from President Trump to reduce U.S. military support to Europe raised expectations for increased military spending. The Stoxx 600 index reached a record high, reflecting a 19% rise in the aerospace and defense sector this year. Tensions were heightened by a recent meeting in Riyadh involving senior U.S. and Russian officials, absent European representation. Concerns lingered over Europe's role in negotiations related to Ukraine, while investors reacted positively to the defense spending surge, contrasting with worries over the implications for government borrowing and debt.
"European defense stocks continued their rally on Tuesday... as President Trump's threats to reduce American military support... raised the prospect that Europe's governments will increase military spending."
"Kirill Dmitriev, the head of Russia's sovereign wealth fund... invited American oil giants to return to the country, dangling access to Russian natural resources."
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