European shares at over three-week highs on defence, financials boost

By Nikhil Sharma

(Reuters) – European shares advanced on Wednesday, led by heavyweight financial stocks, while defence firms got a boost after U.S. President-elect Donald Trump called for higher spending from NATO allies.

The pan-European added 0.3% as of 1006 GMT, trading at its highest level since Dec. 16.

Financial services was amongst the top sub-sectors, adding 1.2% with equity firm Partners Group and investment company EQT (ST:) gaining 3.6% and 2.3%, respectively, following Deutsche Bank (ETR:)’s upgrade to “buy” from “hold”.

European aerospace and defence sector was a stand-out, adding 1.6%, after U.S. President-elect Donald Trump called for higher spending from NATO allies at a press conference late on Tuesday.

Armsmakers including Dassault Aviation, Rheinmetall (ETR:), Leonardo and Saab were up over 4% each.

“We’ve come from a favourable scenario for defence stocks in the previous years, given the escalation in wars around the world,” said Daniela Hathorn, senior market analyst at Capital.com.

“And we’re at a time where defence spending is going to increase even if it’s not fruitful everywhere.”

Healthcare added 0.8%, with index heavyweight Novo Nordisk (NYSE:) up 2.6% after UBS upgraded the drugmaker to “buy” from “neutral”.

Similarly, banks gained 0.9% with HSBC advancing 1.7% to its highest level since 2008.

However, there was caution as yield on Germany’s , the region’s benchmark, hovered near its highest level in two months.

Government bond yields around the world rose on Tuesday tracking U.S. Treasuries after fresh U.S. data raised concerns that the Federal Reserve might slow down its pace of policy easing.

In Europe, December euro zone inflation accelerated in line with expectations, data released on Tuesday showed.

On the day, German industrial orders and retail sales unexpectedly fell in November, while euro zone economic sentiment contracted in December.

Investors were also eyeing U.S. president-elect Donald Trump’s Jan. 20 inauguration to see whether the former president would stick to his rhetoric of imposing hefty tariffs on key trading partners.

Among other stocks, Pluxee advanced 12.6% after the French voucher and benefits company posted 12.1% organic growth in its first-quarter operating revenue, beating market expectations.

Shell (LON:) slipped 1.4% after the energy major trimmed its liquefied production outlook for the fourth quarter.

Vallourec (EPA:) rose 5.7% after the industrial equipment manufacturer achieved its zero net debt target a year ahead of schedule and confirmed its full-year EBITDA outlook.