European stock markets rose yesterday as investors focused on US inflation data expected later this week that will shed light on how the US Federal Reserve is likely to set interest rates.

European markets were also supported by defense stocks, which rebounded after India announced plans to triple its exports of defense equipment. Thus, the pan-European Eurostoxx 600 index closed with an increase of 0.9%, while the share of the Swedish defense industry SAAB jumped by 7.4%, recording the largest increase among the shares of the index. Meanwhile, shares of Thales, Airbus and Rheinmetall rose 1.3-2.5% after India said it would triple its defense exports to $5 billion by 2024-2025. The index, which tracks defense and aerospace stocks, rose 1.9%. In general, all major industrial shares rose yesterday, which gave a boost to the pan-European index, which was also supported by shares of major consumer goods producers such as Unilever and Nestle. The exception in yesterday’s session was Swiss bank Credit Suisse, whose shares fell 4.8% after posting its biggest weekly loss since November.

Investor interest shifted to the upcoming US inflation data.

Earlier there were comments from both the Fed and the ECB that suggest a further aggressive shift in restrictive monetary policy. As a result, investor expectations were shattered by a more lenient attitude from central banks. However, despite last week’s decline, the Eurostoxx 600 is up 8.7% since the start of 2023 on stronger-than-expected corporate earnings and improved eurozone outlook. As the European Commission pointed out yesterday, the Eurozone now estimates that the exchange rate is clearly better than earlier forecasts, and inflation will also be lower than forecast at the end of 2022. Thus, all major European markets rose yesterday, with the London FTSE 100 adding 0.83% and the Frankfurt Xetra DAX adding 0.58%.