Yesterday in his first speech to members of the Bundestag the new Chancellor Friedrich Merz said that Germany will have "the strongest and largest army in Europe" within five years. This morning, his foreign minister went even further, saying he was prepared to spend up to 5% of GDP on defense, as suggested by Donald Trump.

The result? Five of the six strongest gains on the Stoxx Europe 600 on the morning of 15 May were defense stocks. Rheinmetall was obviously up 6%, as investors' favorite stock. Saab (+4%), Leonardo (+3.8%), Kongsberg (+3.4%) and Thales (+3.1%).

Since 1 January, the Aerospace/Defense sub-sector has been the most prolific in Europe: +51.5%, ahead of renewable energy (+40.5%), finance (+30.5%) and construction (+23%). Over three years, this is also the case with a gain of 330.6%, including an 800% increase for Rheinmetall and a 900% increase for Rolls-Royce!

At the same time, the fact that Russia has sent low-level negotiators to Turkey to re-establish contact with Ukrainian representatives shows that a quick agreement between the warring parties is probably not on the agenda.

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