STOXX breaks the 600-mark for first time

Europe’s STOXX 600 closed above 600 points for the first time, up 0.9% at a record 601.76

Europe’s equity benchmark broke through the 600 level for the first time on Monday, as heightened geopolitical risk drove investors into defence stocks.

The post-holiday bounce reflects market sentiment that defence budgets will head structurally higher, even after a recent decline in the sector, fuelled by ceasefire speculation between Russia and Ukraine.

Europe’s STOXX 600 closed above 600 points for the first time, up 0.9% at a record 601.76. The defence index climbed 4.1% to its highest level in almost three months.

Danni Hewson, head of financial analysis at AJ Bell, referring to the 600-point milestone said: It demonstrates that, despite the geopolitical instability around the globe, investors feel confident in the way markets are progressing.

Some heavyweight defensives, including Nestle and Unilever, slipped around 3% each, curbing the day’s gains. The broader food and beverages sector dropped 1.4%.

The European energy index added 0.8% as oil prices climbed by nearly 1%, with traders assessing the possible impact on oil flows from developments in Venezuela, home of the world’s biggest oil reserves.

Technology and basic resources were also up 3.7% and 2.3% respectively.

Germany’s stock benchmark also hit a record high, and was last up 1.3% as defence manufacturer Rheinmetall led the index with a 9.3% gain.

Venezuelan oil supply is unlikely to move global energy markets meaningfully in the near term. Even under optimistic assumptions, it will take years to rehabilitate the country’s energy sector, said Landon Derentz, vice president of energy and infrastructure at Atlantic Council Global Energy Center, a think tank.

Apart from continuing to monitor the situation in Venezuela, investors are focusing on central banks and watching incoming data for clues on how quickly rate cuts could be delivered.