European Stocks Skyrocket Amid Defence and Banking Rally

European stock markets reached new record levels on Wednesday, bolstered by a surge in defense and banking shares. The rally was underpinned by investor analysis of corporate earnings and speculation surrounding a leadership transition at the European Central Bank.

The pan-European index marked a 1.2% rise, closing at 628.69 points, with all major regional benchmarks reporting gains. The defense sector notably climbed by 2.9%, led by BAE Systems, which saw a 4% increase following an impressive full-year operating profit report, attributed to a global demand surge that swelled its order backlog to a record £83.6 billion.

Geopolitical factors, including the collapse of Ukraine-Russia peace talks and potential U.S.-Iran conflict, further fueled the defense sector's momentum. Meanwhile, reports suggested Christine Lagarde's intention to step down from the ECB presidency, giving France's Macron and Germany's Merz significant influence over her successor, stabilizing sentiment despite recent global market disruptions.