European assets back in the spotlight; defence spending could be a tailwind

[SINGAPORE] The world is changing quickly this year. In Europe, the potential for a positive surprise that we identified in December is materialising and a revival is taking hold. Possibilities are becoming realities.

In France, political risk has diminished. The prime minister, in office since Dec 13, 2024, has survived several no-confidence votes and the French parliament has passed the Budget for 2025. In Germany, the incoming coalition government will promise more stability. And rounding out the brighter picture, global leaders are pushing for a swift end to the war in Ukraine. For investors, this means Europe is back.

Donald Trump’s “America First” policy is also driving Europe to change. European leaders have suddenly awoken to a need to bolster their defences. Trump’s threat to slap 25 per cent tariffs on imports from the European Union will only strengthen the resolve of European leaders to forge greater independence from the US.