European officials talked of increasing defense spending at the Munich Security Conference. Saab and Hensoldt stocks stand to benefit.

US defense contractors are on shaky ground just a month into the new administration — taking a backseat to European peers — as mounting concerns over a deluge of policies including a tightened military spending budget send shock waves across the government-sensitive group.

A flurry of trading has helped push the Pan-European Stoxx 600 index to a record high as investors expect Europe’s governments to increase military spending.

European defense stocks rose, buoyed by the prospect of higher military budgets, while global markets were largely subdued with the U.S. closed to mark Presidents Day.

European markets traded higher on Tuesday as traders kept a close eye on geopolitical developments in the region.

NATO is dead,” wrote Vertical Research Partners analyst in a Tuesday report summarizing recent news for his clients.