European Markets Soared 2% After Germany Plans to Raise Debt Limit and Accelerate Spending

Bridgette Randall
05 Mar, 2025
London

Stock market indexes in Europe soared, and bond yields advanced after German leaders agreed to raise the debt limit and step up infrastructure investment. 

Benchmark indexes in Frankfurt jumped more than 3% and in Paris advanced 2% after political leaders worked out a framework to increase arms production and invest in faltering infrastructure and digitization. 

Construction and defense stocks extended the rally after CDU party leader and presumed German chancellor Friedrich Merz announced a plan to invest €500 billion in building infrastructure and increasing defense production. 

Heidelberg Materials soared 14.5% to €162.35, Hochtief AG jumped 12% to €170.70, and Rheinmetall AG advanced 3% to €1,154.0.

Bond yields in Frankfurt, Paris, and Milan rose sharply after the German political leaders agreed on a plan to increase borrowing to finance 

The yield on 10-year German Bunds jumped 25 basis points to a 9-month high of 2.67%, and on the French government bonds advanced 21 basis points to 3.43%.

On the economic front, producer price inflation in the eurozone accelerated on a monthly and annual basis in January, according to data released by Eurostat. 

Producer price inflation increased to 0.8% monthly in January, accelerating from 0.5% in December, driven by higher prices across all categories led by energy. 

On an annual basis, inflation accelerated to 1.8% in January, higher than 0.1% in December, and advanced to the highest level since March 2023.

 

Europe Indexes and Yields

The DAX index increased by 3.4% to 23,080.66, the CAC-40 index edged higher 2.2% to 8,221.37, and the FTSE 100 index advanced by 0.8% to 8,830.48. 

The yield on 10-year German bonds inched higher to 2.68%, French bonds increased to 3.35%, the UK gilts moved up to 4.60%, and Italian bonds edged higher to 3.69%.

The euro increased to $1.07; the British pound was higher at $1.28; and the U.S. dollar was lower and traded at 88.63 Swiss cents.

Brent crude decreased $0.43 to $70.60 a barrel, and the Dutch TTF natural gas was higher by €0.72 to €43.55 per MWh.

 

Europe Stock Movers

Beazley Plc rose 1.4% to 903.50 pence after the UK-based insurance company reported record pre-tax profit in 2024.

Bayer AG advanced 3.4% to €24.40, and the German chemical company signaled that the company may return to profit growth in the next year.

Adidas AG decreased 1.1% to €235.30, and the German sportswear company signaled a possible slowdown in sales growth in the current year following strong gains in 2024. 

Schaeffler AG fell 1.3% to €4.55 after the German precision mobility parts and systems maker offered a gloomy sales outlook for 2025.

SCOR SE dropped 3.2% to €25.42, and the French insurance company said combined P&C ratio deteriorated to 83.1% in the fourth quarter, a rise of 7.5 percentage points compared to the previous year. 

Flutter Entertainment PLC jumped 2.2% to 21,010.0 pence after the online gambling and sports betting company reported better-than-expected earnings in the fourth quarter.