Europeans would need to ramp up military spending quickly, a notion that has set off a market rally, led by defense stocks.

European defense stocks soared on Monday after the region’s leaders vowed to take on “the heavy lifting” of defending Ukraine from Russia. The rally comes as the three-year-old war appears set to move into a new stage after an Oval Office blowup on Friday put President Volodymyr Zelensky of Ukraine on the outs with President Trump.

Shares in Europe’s defense giants — including the British defense contractor BAE Systems, the German arms manufacturer Rheinmetall and the Italian aerospace and defense specialist Leonardo — hit record highs on Monday. The sector’s surge has helped pushed the Stoxx Europe 600, a benchmark once dominated by luxury stocks, to new heights as well.

But behind the investor enthusiasm lies the question: Can Europe, facing high debt loads, chronically low growth and looming tariffs imposed

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