Europe’s Defense Stocks Rally, Bonds Retreat: Markets Wrap

(Bloomberg) -- European bonds fell as investors speculated that governments will have to increase debt sales to support more military spending for a peace deal in Ukraine. Defense shares rallied.

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German, French and Italian bond yields rose, while the euro ticked lower against the dollar. The Stoxx 600 rose 0.2%, with defense firm Rheinmetall AG surging almost 7%. US markets are closed for the Presidents’ Day holiday.

Traders are looking to a meeting in Paris on Monday between European leaders for more clues on the security spending plans. Upgrading defense and protecting Ukraine may cost Europe’s major powers an additional $3.1 trillion over 10 years, according to Bloomberg Economics estimates.

“The scope for a further rally in European FX on a potential Russia-Ukraine ceasefire deal is limited,” Barclays Plc analysts led by Sheryl Dong wrote. “Provisional details are negative for Europe’s security and the war premium is low.”

Asian Tech

Meanwhile, a gauge of Asian shares rose 0.4%, after earlier reaching the highest level since November.

Investors had piled into technology shares, especially in China, amid optimism over DeepSeek’s AI app. A meeting between President Xi Jinping and business figures including e-commerce icon Jack Ma on Monday was also seen as a catalyst for gains.

Goldman Sachs Group Inc. strategists raised their MSCI China index target on optimism over the country’s technological advancements.

Japan’s economy expanded for a third straight quarter as companies boosted investment and net exports improved. The yen strengthened against all its Group-of-10 peers after better-than-expected gross-domestic-product data bolstered expectations of interest-rate hikes from the Bank of Japan.

In commodities, oil steadied after a string of declines as the prospect of increased flows from Iraq and Russia weighed on the outlook.

Some of the key events this week:

• Presidents Day holiday in the US; bond and stock markets are closed, Monday

• Australia rate decision, Tuesday

• UK jobless claims, unemployment, Tuesday

• Bank of England Governor Andrew Bailey speaks, Tuesday

• Canada CPI, Tuesday

• New Zealand rate decision, Wednesday

• Indonesia rate decision, Wednesday

• UK CPI, Wednesday

• South Africa CPI, retail sales, Wednesday

• US FOMC minutes, housing starts, Wednesday

• Australia unemployment, Thursday

• China loan prime rates, Thursday

• Eurozone consumer confidence, Thursday

• G-20 foreign ministers meet in South Africa, Thursday - Friday

• Reserve Bank of Australia Governor Michele Bullock and officials testify to parliamentary committee, Friday

• Japan CPI, Friday

• Eurozone HCOB manufacturing & services PMI, Friday

• UK S&P Global manufacturing & services PMI, Friday

• US S&P Global manufacturing & services PMI, Friday

• Bank of Canada Governor Tiff Macklem speaks, Friday