European shares climb as banks, defence stocks lead rally

FRANKFURT: European shares climbed over 1 percent with gains broadening across sectors, while banks advanced as dealmaking involving Credit Agricole and Banco BPM and strong results from Italy’s UniCredit lifted the sector.

The pan-European STOXX 600 closed 1.26 percent higher at 656.52 points, with the defence sector leading sectors higher with a 4.2 percent rise.

The Euro STOXX banking index soared 3.1 percent.

Banco BPM jumped 10.7 percent after Credit Agricole SA said it had proposed that its Italian subsidiary merge with the Italian lender to create a combined entity that would become the country’s third-largest bank. The French bank’s shares inched lower.

UniCredit gained 6.3 percent after posting a much larger-than-forecast 24 percent annual rise in third-quarter earnings and hiking its full-year profit goal, as it prepares to shape strategy at Commerzbank. The German lender was up 3.9 percent.

“European banks have benefited in the early quarters of this year from the AI expansion. The AI productivity gains have been quite strong, but the financing also helped keep the bank earnings quite strongly along with higher trading revenues,” said Ipek Ozkardeskaya, a senior market analyst at Swissquote Bank.

Rate expectations will come into focus later this week with October inflation data and third-quarter euro zone growth figures.

Investors see the European Central Bank hiking interest rates by at least 25 basis points in January next year, LSEG-compiled data showed. Markets were also awaiting details on who could replace Christine Lagarde as the next president of the central bank.

Aiding risk sentiment further, Brent crude fell 4.4 percent after US President Donald Trump downplayed the likelihood of new strikes on Iran as long as talks to end the conflict progressed.

“While technology shares have attracted attention following the rebound in semiconductor-related stocks, the gains across Europe appear broader than a pure tech-driven rally,” said Susannah Streeter, chief investment strategist at Wealth Club.

“Investors are looking beyond individual sectors and focusing on the possibility that softer energy prices could support economic activity and corporate profitability.”

The technology sector rallied 2 percent, recovering from sharp declines the week before on concerns about the outlook for the global AI trade after the Democrats won control of the US Congress.

Among other movers, Hochtief fell 1.3 percent after majority shareholder ACS said it had not considered launching a takeover bid for the German construction group.

Luxury stocks were among the few weak spots on Monday, down 0.7 percent. Data showed that consumer demand in China, a key importer of European luxury products, was weak in October.