German equities closed Thursday's session higher, with the blue-chip DAX index gaining 2.16%, after German Chancellor Friedrich Merz's ruling coalition unveiled a comprehensive economic stimulus package.
The measures include 10 billion euros in annual tax cuts for lower-income groups, pension reforms, initiatives to expand affordable housing, and a plan to target welfare fraud, among others.
"The reform package shows that both coalition partners were willing to compromise and that the government is embarking on structural reforms to be implemented by year-end. This should bode well for sentiment and dovetails with our forecast that growth will pick up in the second half of the year," Deutsche Bank Research said.
In geopolitical news, Qatar's Foreign Ministry spokesperson Majed Al Ansari said in a social media post that indirect technical talks for a US-Iran peace deal in Doha yielded "positive progress" on select elements of the June memorandum of understanding. The next round of talks is scheduled to resume "at the earliest possible time" after the state funeral and processions for Iran's late Supreme Leader Ayatollah Ali Khamenei, according to the Qatari ministry official.
On the corporate front, Bayer (BAYN.F) was up 8.90%, rising to the top of the blue-chip index, after announcing plans to move its US glyphosate operations under a newly established holding company called Ruveon. The German pharmaceuticals and crop science group aims to streamline its Roundup weedkiller business and tailor its operations to the US market.
Separately, Deutsche Bank Research upgraded Bayer to buy from hold and increased its price target by 33.3% to 60 euros following last week's major US Supreme Court victory ruling in its favor on glyphosate failure-to-warn claims. "This ruling makes the settlement considerably more likely to hold. All in all, we believe it should effectively cap the glyphosate exposure within existing provisions," the research firm wrote, noting that investor focus should begin shifting back to fundamentals.
Meanwhile, European land defense group KNDS paused its planned initial public offering and market listing in Frankfurt and Paris, citing current defense sector volatility. The company's shareholders plan to resume the process once market conditions improve.