European defense stocks experienced a significant surge on Monday, driven by anticipated increases in military spending. This contrasted with the subdued performance of global markets, particularly with U.S. markets closed for Presidents Day.
Prominent defense companies, including BAE Systems listed in London, Thales in France, and Rheinmetall in Germany, saw their stock prices climb by over 7%. These gains followed statements from NATO allies emphasizing the need for increased defense budgets to bolster support for Ukraine and deter potential Russian aggression. This follows recent discussions among NATO members regarding bolstering defense spending to 2% of GDP.
The Stoxx Europe 600 index reached a new closing high, rising slightly more than 0.5%. This marks the eighth record close for the index in 2025, highlighting the robust start European markets have had this year. This positive trend suggests a continued optimistic outlook for European equities.
Meanwhile, U.S. index futures showed modest gains. The upcoming week is expected to bring further earnings reports from major companies, including Walmart and Berkshire Hathaway, providing further insights into the health of the American economy.
According to LSEG data, 383 S&P 500 companies have reported earnings this season, with aggregate earnings surpassing expectations by 6.3%. This outperformance exceeds the long-term average of 4.2%, indicating a potentially strong earnings season.
In Japan, benchmark borrowing costs reached their highest point since 2010 following data revealing a faster-than-anticipated annualized growth rate of 2.8% in the final quarter of 2024. This fueled expectations of further interest rate hikes by the Bank of Japan this year. The ten-year yields climbed to 1.393%, while the Nikkei 225 stock index managed a slight 0.1% gain.
Chinese stocks presented a mixed picture, despite a meeting between Chinese leader Xi Jinping and technology industry leaders, including Alibaba co-founder Jack Ma. This meeting signaled a potential easing of the tech crackdown, coinciding with new U.S. tariffs imposed by the Trump administration.
Larry Hu, chief China economist at Macquarie, noted that the meeting indicates Beijing’s shift towards a more pro-business stance in the face of escalating trade tensions. This shift in policy could have significant implications for the Chinese tech sector.
Xi Jinping Meets with Tech Leaders
Chinese tech stocks, which have faced significant challenges, have recently rallied, buoyed by optimism surrounding the emergence of artificial intelligence startup DeepSeek. While Alibaba shares experienced a slight decline in Hong Kong on Monday, they had surged in New York trading on Friday, bringing year-to-date gains to an impressive 47%. Tencent, currently testing the integration of DeepSeek into its Weixin messaging app, saw its stock price advance.
Hong Kong’s Hang Seng Index closed relatively flat, while mainland China’s Shanghai Composite rose by 0.3%. These varied performances reflect the complex dynamics at play in the Chinese market.
