LONDON — European stocks preliminarily closed in positive territory on Monday, with the region’s defense stocks leading gains after a volatile few trading days.
The pan-European Stoxx 600 was up around 1% just after the closing bell, having climbed back into the green after Friday’s session closed 0.95% lower as concerns over the U.S. banking sector hit European sentiment.
Most indexes ended the session in positive territory, with Germany’s DAX and Italy’s FTSE MIB leading the way and closing 1.9% and 1.5% higher, respectively. The U.K.’s FTSE index climbed 0.5% and France’s CAC 40 notched 0.4% upwards.
Europe’s defense stocks were among the strong movers, with Thyssenkrupp gaining almost 7.9% by the end of the session following the spinout and IPO of its German warship manufacturer TKMS.
Hensoldt topped the index, having added almost 8%, Renk gained around 6.7%, and Rheinmetall closed 5.9% higher after U.S. President Donald Trump had another tense meeting with Volodymyr Zelenskyy over the weekend regarding Ukrainian territory. The Middle East was also in focus after Israel and Hamas accused one another of violating the Gaza ceasefire.
In other stock news, Kering advanced 4.8% amid Sunday news that the Gucci owner was selling its beauty and fragrance business to L’Oreal for 4 billion euros ($4.7 billion). The sale – aimed at cutting Kering’s debt, which was around 9.5 billion euros as of the end of June — comes ahead of L’Oreal’s earnings report on Tuesday, followed a day later by Kering’s results.
Meanwhile, BNP Paribas‘ shares fell 7.7% after it was ordered by a New York federal court to pay $20.5 million over accusations it provided banking services to Sudanese leaders while they committed genocide. In a statement, the French bank called the decision “wrong” and said it would fight the case.
More broadly, Europe’s banks were in positive territory, with Stoxx Europe 600 Banks Index closing more than 1.1% higher. Notching the strongest gains were Banco Sabadell, which added about 4.6%, BPER Banca, which added nearly 3.3%, and Banco BPM, closing 2.5% higher.
“European banks are up 40% this year … and hence there is a high level of expectations in the market,” Christian Edelmann, managing partner for Europe at Oliver Wyman, told CNBC’s “Europe Early Edition” on Monday.
Last week, U.S. lenders Zions and Western Alliance disclosed issues tied to bad loans, leading shares of several financial heavyweights and regional banks lower, before they rebounded on Friday.
Edelmann said: “The credit jitters are really more in the U.S. around the defaults that we’ve seen around two banks that have reported so far. When you look at European reporting — and yes, you just said most of it is coming this week and later — results were pretty solid; no negative surprises on the European banks so far.”
Elsewhere, Swiss building materials company Holcim moved 1.6% upwards after the company — which is one of the world’s largest cement makers — agreed to buy Germany’s Xella, which manufactures walling systems, for 1.85 billion euros ($2.2 billion).
It’s a quieter day for earnings and data releases in Europe on Monday, with Swedish engineering firm Sandvik the only major company set to report financial results.
We’ll be getting more earnings as the week goes on, with SAP, Barclays, Heineken and Svenska Handelsbanken among the companies reporting on Wednesday. The next day Roche, Unilever and Lloyds Banking Group will be reporting earnings.
Meanwhile, in the U.S., stocks moved higher on Monday thanks to a rise in Apple shares. Rare earths lead the way as President Donald Trump works to sure up a domestic supply chain of the materials.
Investors will also their attention toward a slew of big-name earnings reports and inflation data expected in the coming days, and there may be some cautious optimism about an end of the U.S. government shutdown.
Netflix, Coca-Cola, Tesla and Intel are among the names set to report stateside this week, while the September consumer price index is also set for release on Friday and is expected to show that inflation remains hot. Traders will be paying special attention to the report, given the ongoing data blackout caused by the shutdown.
Elsewhere, Asia-Pacific markets traded higher overnight as investors assessed China’s latest growth data which showed GDP rose 4.8% in the July-to-September period compared to a year ago. That was in line with expectations of analysts polled by Reuters.
— CNBC’s Pia Singh and Lee Ying Shan contributed to this market report.
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