The STOXX Europe 600 rose 1.03% to 627.48 on Wednesday, marking a fresh record high as of 15:07 GMT+1. Investors pushed the pan-European benchmark higher on strong defense earnings and a rebound in banking stocks. Most major regional indices traded in positive territory, extending Europe’s broader rally. Defense Stocks Power The Rally The defense sector index jumped about 2%, leading gains across Europe. BAE Systems advanced sharply after reporting a better-than-expected rise in full-year operating profit. Strong global demand lifted its order backlog to a record £83.6 billion, equivalent to $113.50 billion. The update reinforced investor appetite for aerospace and military-linked names. The sector gained further momentum after reports indicated that Germany plans to acquire a minority stake in KNDS, the maker of Leopard tanks, ahead of a planned listing later this year. The move signals continued state interest in strategic defense assets. As geopolitical tensions persist, capital continues to rotate toward companies tied to security and military spending. In the United Kingdom, the FTSE 100 also reached record levels. Shares of Rolls-Royce Holdings climbed, supporting the broader advance. Investors rewarded firms exposed to aerospace growth and government contracts. Banking Sector Rebounds Banks rose more than 1% after recent weakness linked to global technology sector volatility. The rebound helped stabilize broader market sentiment. Financial stocks benefited from improved risk appetite and steady interest rate expectations across the euro area. Mediobanca surged after Monte dei Paschi di Siena announced plans to take full control of the lender. The development ended weeks of uncertainty surrounding the merchant bank’s future. Elsewhere, Glencore climbed after announcing a $2 billion shareholder return despite reporting slightly lower earnings. Not all companies shared in the gains. Bayer dropped sharply after reaching a multibillion-dollar agreement to resolve lawsuits related to its Roundup weedkiller. IMCD fell following weaker-than-expected quarterly results. Meanwhile, Straumann advanced after issuing strong forward guidance. ECB Leadership And Policy Outlook Investors also assessed reports that Christine Lagarde may step down as president of the European Central Bank before the 2027 French presidential election. The report introduced a degree of uncertainty, yet market reaction remained measured. Analysts noted that European Union leaders typically balance policy views within the ECB’s executive board. The central bank has kept interest rates steady in recent meetings. Market focus now shifts toward inflation trends and whether price growth could undershoot the 2% target as the euro strengthens. Executive Board member Piero Cipollone also highlighted progress on the digital euro project, which aims to reinforce Europe’s payment infrastructure. UK Data Adds To Optimism In Britain, inflation slowed to 3.0% in January from 3.4% in December, its lowest level in nearly a year. Core inflation also eased. Markets now price a high probability that the Bank of England could begin cutting rates in 2026. The unemployment rate rose to 5.2%, strengthening expectations of monetary easing. At the same time, geopolitical developments, including Ukraine-Russia peace discussions and U.S.–Iran negotiations, continue to shape risk sentiment. For now, investors appear focused on earnings resilience and sector rotation. The STOXX 600’s record close reflects that confidence.