Euro Gains With Defense Stocks on Ukraine Support: Markets Wrap

(Bloomberg) — The euro gained and defense stocks rallied as a concerted push by European leaders fueled bets on a wave of military spending.

The common currency rose 0.4% against the dollar. Defense stocks soared, boosting the market capitalization of the sector by about $30 billion in Monday’s session as BAE Systems Plc jumped 13%, Rheinmetall AG added 16% and Saab AB gained 11%. The moves left the Stoxx 600 up 0.2%, near an all-time high.  

Bitcoin retreated, trimming a Sunday rally spurred by President Donald Trump’s comments on a strategic crypto reserve.

Markets are starting the week with geopolitics dominating as European leaders assemble what Britain called a “coalition of the willing” to secure Ukraine following an Oval Office clash between Trump and Ukrainian President Volodymyr Zelenskiy. A US tariffs deadline is also looming, while China is due to stage its biggest political huddle of the year. 

“The US turnaround is certainly a historic opportunity for Europe to tackle the subject of an autonomous European defense with potentially very positive economic ramifications,” said Christopher Dembik, senior investment manager at Pictet Asset Management. “But beware of excessive optimism.”

German and French bonds dropped amid concern about rising debt issuance by the bloc. Germany’s probable next government is considering setting up two special funds for defense and infrastructure spending, which could amount to hundreds of billions of euros, according to a Reuters report citing unidentified people. 

The yield on 10-year US Treasuries climbed two basis points, while stock futures for the S&P 500 benchmark were little changed.

Tariff Deadline

Investors are bracing for news of any last minute negotiations to avoid a further increase in US trade tariffs on Chinese goods that are due to come into effect this week along with levies on Mexico and Canada.

The long-promised tariffs scheduled to take effect Tuesday would easily be among the most sweeping of the Trump era, applying to roughly $1.5 trillion in annual imports. They would put a 25% tariff on all imports from Canada and Mexico, except Canadian energy, which would face a 10% rate. He has also said he’ll double a tariff on China to 20%. 

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Key events this week: 

• Eurozone CPI, HCOB manufacturing PMI, Monday
• UK S&P Global manufacturing PMI, Monday
• Japan unemployment, Tuesday
• Eurozone unemployment, Tuesday
• US President Donald Trump’s speech to a joint session of Congress, Tuesday
• Australia GDP, Wednesday
• China Caixin services PMI, Wednesday
• China’s National People’s Congress, Wednesday
• Eurozone HCOB services PMI, PPI, Wednesday
• BOE Governor Andrew Bailey and colleagues speak, Wednesday
• Eurozone retail sales, ECB rate decision, Thursday
• Eurozone GDP, Friday
• US nonfarm payrolls, consumer credit, Friday

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.2% as of 9:16 a.m. London time
• S&P 500 futures were little changed
• Nasdaq 100 futures rose 0.2%
• Futures on the Dow Jones Industrial Average fell 0.2%
• The MSCI Asia Pacific Index rose 0.8%
• The MSCI Emerging Markets Index was little changed

Currencies

• The Bloomberg Dollar Spot Index fell 0.3%
• The euro rose 0.4% to $1.0417
• The Japanese yen rose 0.4% to 150.02 per dollar
• The offshore yuan fell 0.1% to 7.3033 per dollar
• The British pound rose 0.3% to $1.2615

Cryptocurrencies

• Bitcoin fell 2.6% to $91,813.09
• Ether fell 7.1% to $2,347.08

Bonds

• The yield on 10-year Treasuries advanced two basis points to 4.23%
• Germany’s 10-year yield advanced one basis point to 2.42%
• Britain’s 10-year yield advanced five basis points to 4.53%

Commodities

• Brent crude fell 0.6% to $72.40 a barrel
• Spot gold rose 0.4% to $2,869.39 an ounce

This story was produced with the assistance of Bloomberg Automation.

–With assistance from Greg Ritchie, Matthew Burgess, Julien Ponthus, Allegra Catelli, John Cheng, Michael Msika and Catherine Bosley.

(An earlier version corrected Zelenskiy’s title.)

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