Europe midday: Defence stocks in focus on report UK to lift spending

(Sharecast News) - European shares opened higher on Monday as investors digested weak GDP growth from Japan, while defence stocks were in focus on a report that the UK government planned to increase military spending.

The pan-regional Stoxx 600 index had gained 0.32.66% to 619 points by 1200 GMT, with all major bourses higher. Germany's DAX was up 0.08%, France's CAC 40 rose 0.28% and the UK's FTSE 100 increased by 0.22%.

"US markets are closed today, and that may be a welcome relief to many, after last week was once again dominated by violent swings linked to artificial intelligence," said Hargreaves Lansdown analyst Matt Britzman.

"Some stocks are flying, and others are getting crushed in moves that often feel disconnected from fundamentals. Power and utility names were the clear winners as investors bet they'll be essential to the AI build-out, while anything tied to data or software found itself in the firing line."

"Away from the AI noise, falling bond yields and softer inflation offered some relief, but a few worrying signals around growing loan defaults were one reminder that not everything under the hood is improving."

The Japanese economy grew less than expected in the last three months of the year, according to official data published on Monday, narrowly avoiding a technical recession and increasing pressure on new Prime Minister Sanae Takaichi's government to provide fiscal stimulus.

GDP expanded by just 0.1% in the fourth quarter, well short of forecasts for growth of 0.4%. The growth followed a 0.7% contraction - revised downwards from an earlier reading of -0.6% - in the previous three months.

Meanwhile in the eurozone, industrial production in the euro area fell by 1.4% month on month in December, reversing November's 0.3% increase and marking the steepest contraction since April, according to first estimates from Eurostat on Monday.

The decline, which broadly matched expectations for a 1.5% drop, snapped a three-month run of gains. Across the wider EU, output fell 0.8% after edging down 0.1% in November.

On an annual basis, eurozone industrial production rose 1.2% in December, slowing from 2.2% growth in November and coming in slightly below forecasts.

In Switzerland, the economy returned to growth in the final quarter of 2025, with gross domestic product rising 0.2% quarter on quarter after a 0.5% contraction in the third quarter, according to preliminary data from the statistics office released on Monday.

The figures, adjusted for seasonal factors and large sporting events, point to a modest rebound following a mid-year slump linked in part to US tariff measures.

On the equities front, NatWest shares rose as the UK lender started a �750m share buyback program.

Trading in Dassault Systemes shares were briefly halted after a sharp fall in response to broker AlphaValue cutting its rating to 'reduce' from from 'buy' amid renewed concerns over AI monetization and a "worrying loss of momentum" at the French software group.

Defence firms Babcock, BAE Systems, Rolls-Royce, Melrose and Qinetiq gained following a report that Downing Street is considering making a significant increase in defence spending. According to the BBC, the government is mulling over the idea of meeting an existing spending target earlier than planned at a potential cost of billions of pounds.

Reporting by Frank Prenesti for Sharecast.com