Shares break record highs on Ukraine peace hopes

European shares rose to record levels on Monday, led by defence stocks, as the region's top political leaders called for an emergency summit on the Ukraine war amid growing US calls to boost military spending for security.

The pan-European STOXX 600 index jumped as high as 0.4 per cent, as a gauge of defence and aerospace stocks surged over three per cent to lifetime peaks, having already more than doubled in value since Russia invaded Ukraine three years ago.

Investors expect earnings in the industry to continue to rise strongly, driven by a significant surge in defence budgets to meet new security needs - which analysts have dubbed a "supercycle" for the sector.

"A resolution to the conflict in Ukraine could deliver positive growth impulses for Europe, including improved consumer confidence, lower energy prices, and easier financial conditions," Bruno Schneller, managing director at Erlen Capital Management.

Banks were also in demand, up 1.5 per cent and flying to 17-year highs, helped by a rise in bond yields.

French President Emmanuel Macron will on Monday host an emergency summit on Ukraine after US officials suggested Europe would have no role in any talks this week in Saudi Arabia aimed at ending the conflict.

The imminent threat of reciprocal US tariffs has receded until April, but the risk that they might include levies based on value added taxes in other countries was a major worry.

"Trade policy remains a wildcard, with the potential for incremental tariffs and their impact on inflation and growth. While the announced tariffs have not yet materially altered the economic landscape, further escalation could introduce new uncertainties," Schneller added.

The Financial Times reported on Sunday that the European Commission would explore tough import limits on certain foods made to different standards in an effort to protect its farmers, echoing President Donald Trump's reciprocal trade policy.

US markets are shut on Monday for the Presidents Day holiday, keeping trading volumes lighter than usual.

Goldman Sachs has raised its outlook for Chinese growth and stocks, arguing that widespread adoption of AI could raise earnings per share by 2.5 per cent a year over the next decade. It would also lift the fair value of Chinese equity by 15 per cent to 20 per cent and attract $US200 billion of fund inflows.

in Asia, Hong Kong equities retreated from recent highs on Monday, while Chinese stocks ended slightly up as investors started to pocket gains from a tech-driven rally while digesting news from President Xi Jinping's meeting with top tech bosses in Asia.

The Hang Seng index closed flat, China's blue-chip CSI300 index finished up 0.21 per cent.

Tokyo's Nikkei also steadied with little change on the day after Japan reported surprisingly strong economic growth of an annualised 2.8 per cent for the fourth quarter. The gains were limited by a further rise in the yen to 151.65 per dollar.

South Korean shares added 0.6 per cent and Taiwan's rallied 1.5 per cent.

A holiday in US markets made for thin trading, though the S&P 500 futures and Nasdaq futures rose 0.2 per cent.

S&P 500 ended Friday up 1.5% on the week, while the Nasdaq gained 2.6 per cent.

The week ahead is filled with key data releases, including February flash business activity data across the globe while in Europe, markets also have their eye on German elections this weekend.

The euro was little changed around $US1.05, while the US dollar slipped almost 0.5 per cent to 151.63 yen.

The UK pound held steady at around $US1.2590, just below its highest level in two months, as investors looked towards employment and inflation data later in the week.

Central banks in Australia and New Zealand are both expected to cut interest rates at policy meetings this week.

In commodity markets, gold came off Friday's record highs at $US2,898 an ounce having rallied for seven weeks straight.

Oil producer group OPEC+ is considering pushing back a series of monthly supply increases due to begin in April despite calls from US President Donald Trump to lower prices, Bloomberg News reported on Monday, citing delegates.

Brent rose 27 cents to $US75.01 a barrel, while US crude gained 29 cents to $US71.03 per barrel.