European stocks kicked off the week on firmer footing, as U.S. military strikes on Venezuela stirred fresh geopolitical concerns and sent investors piling into defence industry stocks on Monday.
The advance, coming after a holiday lull, highlights expectations of structurally higher defense spending despite some recent weakness in the sector's stocks driven by speculation over a potential ceasefire between Russia and Ukraine.
The pan‑European STOXX 600 (.STOXX), opens new tab climbed as much as 0.6% at 599.65, a record high. The defense index (.SXPARO), opens new tab rose 3.3% to its highest level in nearly three months.
Technology (.SX8F), opens new tab and basic resources (.SXPP), opens new tab were also up 2.3% and 2.1% respectively. Germany's stock benchmark (.GDAXI), opens new tab too scaled a new record high, last up 1%, with defense manufacturer Rheinmetall (RHMG.DE), opens new tab leading the index with a 7% gain.
The European energy index (.SXEP), opens new tab slipped 0.2% on subdued oil prices, with sufficient global supplies allaying concerns about disruptions stemming from the U.S. raid on Venezuela to capture President Nicolas Maduro.
"Venezuelan oil supply is unlikely to move global energy markets meaningfully in the near term. Even under optimistic assumptions, it will take years to rehabilitate the country's energy sector," said Landon Derentz, vice president of energy and infrastructure at Atlantic Council Global Energy Center, a think tank.
Investors are continuing to monitor fallout from the strikes though. President Donald Trump said on Saturday he was putting Venezuela under temporary American control.
Investors are also focusing on central banks, watching incoming data for clues on how quickly rate cuts could be delivered. "We expect 2026 to be a better year for the Euro area economy than 2025 given prospects for cyclical improvement," Goldman Sachs said, in a note led by its chief European economist Sven Jari Stehn.
"Further (interest rate) cuts are possible but would require a clear catalyst at this point, either via a material deterioration in the activity outlook or a more pronounced undershoot of inflation."
Meanwhile, miners Glencore (GLEN.L), opens new tab, Rio Tinto (RIO.L), opens new tab and Anglo American (AAL.L), opens new tab got a boost from higher copper prices. Shares of ASML (ASML.AS), opens new tab, the world's biggest supplier of computer chip-making equipment, rose 3.2%. Analysts at brokerage Bernstein upgraded the stock to "outperform" from "market perform" and raised their price target on the stock to 1,300 euros from 800 euros.
