The rally was led by German arms manufacturer Rheinmetall, which jumped 14% in Frankfurt, while UK-based BAE Systems soared 16% in London and Italy’s Leonardo climbed 10% in Milan. Rolls Royce was up 5.7%. The stock surge followed reports that Germany ...

The value of European defence stocks has risen by more than £100bn this year as the Continent races to rearm. An index tracking the biggest European munitions firms – including BAE Systems in the UK, Rheinmetall in Germany and Leonardo in Italy – has risen 34 per cent since January.

The expectation of impending higher arms spending was one of the factors that led to the European aerospace and defense sector stock index to rise.

Shares in BAE Systems, Rheinmetall and Leonardo all added to strong gains this year on Monday amid expectations of rising European defense spending.

Yet leaders who gathered in London on Sunday have a consolation of sorts: the pressure to rapidly rearm gives them cover to hike taxes.

Shares in Germany's Rheinmetall have soared 57% this year, while BAE Systems is up 17% and France's Thales has gained 22%.

German defence companies seeking more capacity as Europe prepares to raise military spending are eyeing the ailing car industry, the first sign of a shift that could help revive the continent's biggest economy after two years of contraction.

Rheinmetall (OTCPK:RNMBF) (OTCPK:RNMBY) on Monday jumped as much as 15% to a record high amid a broader rally in Europe, Middle East and Africa defense stocks as European leaders worked to develop a plan to end the war in Ukraine.

This year’s fierce rally in European defense stocks found new legs Monday after leaders on the continent met over the weekend to forge a peace plan for Ukraine, during

European stock markets hit fresh record highs after a pledge by regional leaders to boost military spending, with defense stocks adding $34 billion in market capitalization.Most Read from BloombergCut