(Bloomberg) -- France’s equities benchmark hit a record high, catching up with surging European peers, amid a fresh frenzy for defense stocks in the region and as investors continued to trim the country’s political risk discount.

The CAC 40 Index rose as much as 1.6% to 8241.6 points in Paris, joining a broader rally that has lifted European stock markets to unchartered highs.

The French gauge surpassed its prior record closing high of 8,239.99 set in May 2024. European defense stocks surged Monday as the region’s political leaders offered Ukraine their support and pledged to boost defense spending amid concerns of a US pullback.

“The performance of the CAC 40 has a lot of similarities with the rally of broader European markets: banks and defense companies are outperforming and that gives you all the ingredients for the CAC 40 to rebound,” said Karen Georges, an equity fund manager at Ecofi.

The pan-European Stoxx Europe 600 Index has risen 11% this year, hitting multiple records along with Germany’s DAX index and London’s FTSE 100. The outperformance has been fueled by lower interest rates, resilient earnings and the possibility of a ceasefire between Ukraine and Russia.

On June 7, President Emmanuel Macron called a snap parliamentary election and triggered a selloff in French assets as investors fretted over the state of the nation’s finances.

Prime Minister Francois Bayrou managed to force a budget through a divided parliament, surviving multiple no-confidence votes. The yield premium between 10-year government bonds and safer German equivalents, a closely watched gauge of risk, is trading at 72.4 basis points after hitting 90 in November, its widest since the European sovereign debt crisis in 2012.