Europe close: Defence plays underpin regional gains

16th Feb 2026 16:43

(Sharecast News) - European shares finished higher on Monday as investors weighed a sharp fall in eurozone industrial production and digested a raft of economic data from the UK, Switzerland and Japan, while defence stocks were in focus on reports that the UK government could accelerate military spending.

The pan-European Stoxx 600 rose 0.13% to 618.52.

Germany's DAX fell 0.46% to 24,800.91, France's CAC 40 edged up 0.06% to 8,316.50, and the UK's FTSE 100 gained 0.26% to 10,473.69.

"The usual US-holiday drift has pervaded markets today, though rising bank stocks have supported the FTSE 100," said Chris Beauchamp, chief market analyst at IG.

"It has been a disjointed start to the week for global markets thanks to the Chinese and US holidays which have essentially rendered Monday a write-off for most investors.

"Though it must be said that the dip-buying reflex remains strong, demonstrated by today's rebound in UK bank shares, helping to lift the FTSE 100 throughout the day."

Danni Hewson, head of financial analysis at AJ Bell, added that with Wall Street closed for President's Day, London markets had "ambled along".

"Investors have appeared to enjoy the calm ahead of a data-filled week as the FTSE 100 sailed to another record close," she said.

Eurozone industrial production falls in December

In economic news, data from Eurostat showed industrial production in the euro area fell 1.4% month on month in December, reversing November's 0.3% rise and marking the steepest contraction since April.

The decline broadly matched expectations for a 1.5% drop and snapped a three-month run of gains.

Across the wider EU, output fell 0.8% after a 0.1% dip in November.

On an annual basis, eurozone production rose 1.2% in December, slowing from 2.2% growth in November, while EU output increased 1.4%.

For 2025 as a whole, industrial production expanded 1.5% in both the euro area and the EU, the first annual increase since 2022.

The December contraction was driven mainly by a 1.9% fall in capital goods output in the euro area after a 2.6% rise in November.

Energy and non-durable consumer goods each fell 0.3%, intermediate goods slipped 0.1% and durable consumer goods rose 0.2%.

In the EU, capital goods declined 1.4% and energy 0.4%, while intermediate goods rose 0.1%, durable consumer goods gained 0.5% and non-durable consumer goods climbed 0.6%.

Among member states, Slovakia recorded a 4.9% drop, Germany 2.9% and Spain 2.6%, while Luxembourg rose 6.4%, Sweden 4.4% and Malta 4.2%.

Poland posted the strongest annual growth at 6.9%, ahead of Sweden at 4.8% and Croatia at 4.5%, while Slovakia, Luxembourg and Bulgaria saw the steepest yearly declines.

Germany's weaker car production was cited as a key drag.

In Switzerland, preliminary data showed gross domestic product rose 0.2% quarter on quarter in the fourth quarter after a 0.5% contraction in the third, bringing full-year growth to 1.4%, up from 1.2% in 2024 but below the long-term average of around 1.8%.

On a per capita basis, the economy expanded 0.5% in 2025, with GDP per capita up 4.8% since 2019.

Services, notably finance and trade, drove the rebound, while export-oriented industry contracted for a third straight year amid US tariffs that were lifted to 39% in July before being reduced to 15% from mid-November.

The annual growth figure was slightly below the Swiss National Bank's 1.5% forecast, with the central bank expecting growth of around 1% in 2026 and not ruling out a move below its current 0% benchmark rate.

In the UK, the S&P Global UK consumer sentiment index edged up to 44.8 in February from 44.6 in January, the highest in three months but still well below the neutral 50 level.

The household finance index rose to 43.7, while the debt sentiment index fell to a 23-month low of 48.2 as debt levels climbed to 52.1, a seven-month high.

Sentiment around major purchases hit a 10-month low, though the spending sentiment index rose to a three-month high.

The labour market sentiment index slipped to 52.0 from 52.1.

Separately, figures from Rightmove showed the average asking price of a newly listed home was £368,019 in February, down £12 on the month after January's 2.8% surge, as sellers held on to earlier gains amid high supply and price-sensitive demand.

"Unemployment is expected to have held steady in tomorrow's jobs update from the ONS, but there's a lot to unpack behind that headline figure and much attention will be paid to any further slowing of wage growth and fall in payrolled numbers," Hewson said.

"One bright moment should come mid-week in the latest inflation data, which is projected to have resumed its slow progress towards the Bank of England's two percent target.

"Market expectation of a March interest rate cut has now increased to 65%, according to the latest snapshot from LSEG.

"The falling cost of borrowing should act as a stimulus for a struggling economy, potentially boosting consumer spend and helping businesses give the green light to any investment they've been holding off on."

In Asia, Japan's economy grew just 0.1% in the fourth quarter, below forecasts for 0.4%, following a revised 0.7% contraction in the previous quarter, narrowly avoiding a technical recession.

For 2025, GDP rose 1.1% after a 0.2% contraction in 2024.

The data added to pressure on prime minister Sanae Takaichi, whose government has already pushed through a JPY 21.3trn yen stimulus package.

NatWest and defence names in the green, Dassault Systemes sinks

In equities, NatWest Group rose 4.76% after launching a £750m share buyback, with bank stocks helping underpin the UK index.

Defence names advanced after the BBC reported that Downing Street was considering meeting an existing military spending target earlier than planned.

"Defence stocks were back in vogue following the prime minister's comments at the Munich Security Conference that the UK was going to have to spend more, and do it faster," Hewson said.

"Speculation is mounting that the increase in defence spend will come ahead of the government's current target.

"Babcock, BAE Systems and Qinetiq were among those enjoying share price gains and Keir Starmer has already signalled that an increase in defence spending should filter through to economic growth and job creation - something that will be front and centre in the coming days."

On the downside, Dassault Systèmes plunged 10.44%, with trading briefly halted after broker AlphaValue cut its rating to 'reduce' from 'buy', citing concerns over AI monetisation and a loss of momentum.

Rio Tinto fell 1.06% after suspending work at its Simandou iron-ore project in Guinea following a fatality.

"Precious metals have had the bid knocked from underneath them today, although the selling remains muted compared to the volatility seen earlier in the month," Beauchamp added.

"Today marks a rare moment when gold and silver have lost ground along with bitcoin, which continues to shy away from the $70,000 level, a worrying sign for those hoping for a cryptocurrency revival."

Reporting by Josh White for Sharecast.com.