By Nikhil Sharma
(Reuters) – German shares hovered near a record high on Tuesday, ahead of a parliamentary vote on historic debt reforms that will enable massive state borrowing to stimulate growth in the country.
The pan-European STOXX 600 was up 0.8% as of 0940 GMT. Germany’s blue-chip index jumped 1.3% and the domestically-exposed small-cap index climbed 3.1% to a more than three-year high.
Europe’s largest economy is set to vote on a 500-billion-euro ($546 billion) fund for infrastructure and to ease constitutionally enshrined borrowing rules to allow higher spending on security.
“This increase in spending is expected directly to be translated into higher sales and revenues for companies (in Europe),” said Fiona Cincotta, senior market analyst at City Index.
“German economy, particularly over the past couple of years, has been very stagnant. Suddenly, this injection of spending is expected to give a boost.”
With the STOXX 600 up 9.4% for the year, outpacing Wall Street peers, the fresh optimism comes at a time when allocation to U.S. stocks witnessed the biggest drop ever in March.
City Index’s Cincotta noted that the timing “is really important because it’s happening at a time when investors are also looking to get out of the U.S.”
Computacenter jumped 11% to a more than six-month high after the technology and services provider said it was ‘well-placed’ for progress in 2025, with a strong order backlog across all regions.
The stock boosted the technology index by 1.8%, the biggest sectoral gainer.
The index of European banks, which benefits from higher spending prospects, rose 1.4% to its highest level since February 2011.
The automobiles and parts also boosted the main index, rising 1.6%.
The German 10-year bond yield jumped 4 basis points to 2.845% as investors awaited the parliamentary vote.
Elevated long-term bond yields strained the real estate index, which slid 0.4%.
Focus was also on the upcoming phone call between U.S. President Donald Trump and Russian President Vladimir Putin as the U.S. attempts to convince Moscow to accept a ceasefire in its war with Ukraine and move toward a more permanent end to the three-year conflict.
Ukraine has agreed to the U.S. proposed 30-day truce.
Among other stocks, Italy’s Iveco rose 5% to a record high after reports of interest in the company’s defence unit as the group prepares to spin off the business.
Bollore lost 6.5%, the worst hit on STOXX 600 after the French conglomerate reported full-year results.
(Reporting by Nikhil Sharma; Editing by Mrigank Dhaniwala and Eileen Soreng)
