European markets closed higher on Monday, amid a charge in defense shares after regional leaders held security talks that touched on bolstered military spending.

The regional Stoxx 600
index moved between losses and gains in early deals before closing 1.1% higher. The Stoxx Europe aerospace and defense index rose by 8%, marking its best session in five years.
Among the biggest movers were Germany's Hensoldt, closing 22.3% higher, Italy's Leonardo, which was up 16%, and Dassault Aviation
, which gained 15%.

Sweden's Saab, France's Thales
, and Britain's BAE Systems also crowded the top of Stoxx 600 movers.

Rolls-Royce
, a player in defense as well as commercial aerospace which hit an all-time high last week after reinstating its dividend, added 4.4%.

EU Commission President Ursula von der Leyen told reporters in Brussels on Monday that the bloc's 27 member states would be given details about the so-called rearm Europe plan on Tuesday.

"Tomorrow, I will inform the member states through a letter about the rearm Europe plan. We need a massive surge in defense without any question," she said. "We want lasting peace, but lasting peace can only be built on strength, and strength begins with strengthening ourselves."

Her comments came after British Prime Minister Keir Starmer hosted a Ukraine peace summit over the weekend. During the talks, the U.K. leader said Kyiv's allies must step up and continue their support, following the explosive meeting between U.S. President Trump and Ukrainian President Volodymyr Zelenskyy on Friday. The U.K. last week committed to increasing its defense spending as a share of GDP over the coming years — a sentiment echoed by other leaders at the summit.
Reuters reported Sunday that the parties likely to form the next German government were considering setting up special funds for both defense and infrastructure, with the former potentially unlocking 400 billion euros ($416 billion) in spending.

Robin Winkler, chief Germany economist at Deutsche Bank, said in a Monday note that the move would be "a fiscal regime shift of historic proportions."
Data out Monday showed euro zone inflation dipped to 2.4% in February, slightly above analyst expectations, ahead of the European Central Bank interest rate decision on Thursday.

Economists surveyed by Reuters had expected inflation to dip to 2.3% in February, down from 2.5% in January.

The euro zone Purchasing Managers' Index meanwhile showed contraction in the bloc's manufacturing sector eased to its least severe in two years.

U.S. stock futures edged up early Monday and Asia-Pacific markets mostly rose overnight as traders awaited more clarity on President Donald Trump's plans to impose tariffs on key U.S. trading partners this week.

U.S. Commerce Secretary Howard Lutnick reportedly told Fox News on Sunday that the exact tariff that will be levied against Mexico and Canada starting Tuesday is still "fluid," which means it could be lower than the proposed 25%. He added that the additional 10% duty on China imports is "set.

Source: CNBC