U.S. defense stocks remain mired in a postelection slump as investors try to understand what changing trans-Atlantic relationships mean for the sector.European defense stocks rose again on Tuesday, while their U.

Shares in BAE Systems, Rheinmetall and Leonardo all added to strong gains this year on Monday amid expectations of rising European defense spending.

US President Donald Trump has long said he would negotiate a quick end to Russia’s war in Ukraine. In pursuit of a deal, the US has engaged with the Kremlin while pressuring Kyiv to support the peace initiative.

Stock markets rebounded after U.S. Commerce Secretary Howard Lutnick dangled a plan to reduce tariffs on Canada and Mexico, but the dollar continued to sell off.

European stock markets hit fresh record highs as European leaders pushed forward with plans to boost defense spending and support Ukraine. Defense stocks added $35 billion in market capitalization. France’s CAC 40 Index surpassed its May record high, while Germany’s DAX Index gained 3.4% for its biggest one-day advance since 2022.

Germany has urged the European Union to reform its fiscal rules to allow countries to spend more on defense. This is a significant shift for the country, known for its restrictions on spending for such purposes,