Merz hints at debt brake reform before new parliament meets

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Defence stocks rose across Europe after the centre-right Christian Democrats won Sunday’s German election as investors bet the outcome would lead to increased military spending. 

Germany’s Rheinmetall rose 3.8 per cent, while London’s BAE Systems was up 2 per cent. Thales, the French aerospace and defence company, rose 1 per cent. 

The moves in the defence sector also followed comments from Friedrich Merz, Germany’s chancellor-in-waiting, that his “absolute priority will be to strengthen Europe as quickly as possible so that, step by step, we can really achieve independence from the USA”. 

Sven Jari Stehn, an economist with Goldman Sachs, said there remained options to increase fiscal support in Germany, including in the defence sector, although “they likely need some time to be implemented”.

Line chart of Share prices, rebased showing Defence stocks rise following German election results

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