Europe: Shares end higher on hopes of German reforms, Ukraine ceasefire

EUROPEAN shares closed higher for a second day on Monday, supported by energy and healthcare stocks, with the focus on Germany’s debt reform plans and the Russia-Ukraine conflict.

The pan-European Stoxx 600 ended 0.79 per cent higher at 550.94 points, kicking off the week on a positive note. It extended gains from Friday, when it logged its biggest gain in over a month after Germany’s political parties agreed on a historic deal to ramp up state borrowing.

The oil and gas sector led gains with a 1.5 per cent rise, tracking higher crude prices after the US vowed to keep attacking Yemen’s Houthis until the Iran-aligned group ends its assaults on shipping.

Healthcare stocks added 1.4 per cent, logging their fourth straight gain and longest win streak since late January.

Luxury stocks fell. L’Oreal slipped nearly 1 per cent, Kering dropped 2.8 per cent and Burberry declined 4.3 per cent, with the broader index off 0.6 per cent.

Investors remained optimistic about German fiscal reforms, which, if passed, could be a bumper stimulus for the ailing economy, even though they were hit by last-minute legal challenges.

“The legislation is covered by less than 20 pages of text, so we think the legal risk here is low ... we still don’t think markets have fully caught up to how much of a game changer this will be for Germany over the next few years,” said analysts at Deutsche Bank.

“Our economists believe this could lead to a fiscal stimulus of 3-4 per cent of GDP by 2027 at the latest.”

Germany’s blue-chip index was 0.7 per cent higher, and has outperformed local peers with an over 15 per cent jump for the year.

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US: Stocks gain as market looks ahead to Fed

Focus also remains on talks between Russian President Vladimir Putin and his US counterpart Donald Trump on Tuesday, as an end to the Russia-Ukraine conflict is seen bringing lower energy costs across Europe.

Trump’s threat to slap a 200 per cent tariff on European wine and spirits last week, and his flip-flop trade policy, have created volatility in global markets, with investors awaiting more clarity on tariff implementation.

This week, major central banks, including the US Federal Reserve and the Bank of England, are set to meet, with both banks expected to keep rates on hold.

Among other stocks, Phoenix Group topped the Stoxx 600 after the British insurer reported a bigger-than-expected rise in full-year adjusted operating profit and total cash.

Qinetiq Group sank over 20 per cent to the bottom of the benchmark Stoxx index, marking its biggest-ever loss after the defence company warned of delays in several UK and US contracts that would affect its revenue for fiscal 2025. REUTERS