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(Bloomberg) — European stocks posted a third straight session of gains after German lawmakers voted for a bill set to unlock hundreds of billions of euros in defense and infrastructure spending. 

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The Stoxx Europe 600 Index ended the session 0.6% higher. The gauge trades just 1.6% below its all-time high in early March and is still on track for its best first quarter since 2019.

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The bill is now scheduled to go to the upper house, or Bundesrat, for final approval on Friday. German stocks outperformed the pan-European index, with the benchmark DAX Index rising 1%.

Defense shares gained, with Thyssenkrupp AG jumping 13%. Other sectors making gains included energy and banks.

“It’s clear that we are facing de facto stimulus programs across Europe driven by infrastructure plans in Germany and the armament projects all over Europe, this will have an impact on growth,” Stephane Boujnah, CEO of Euronext, told Bloomberg TV. 

Equities in the region have rallied in recent weeks as investors welcomed Germany’s move as a harbinger of looser fiscal policies across Europe. 

Meanwhile, investors slashed exposure to US equities by the most on record in recent weeks, according to Bank of America Corp.

The S&P 500 index has fallen 4.7% since the beginning of the year against a 9.2% advance for Europe’s main benchmark.  

For Raphael Thuin, head of capital markets strategies at Tikehau Capital in Paris, the central issue for investors remains the scale of upcoming US tariffs and their possible impact. 

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“That’s the theme which dominates the market,” he said, as global investors continue to hunt for opportunities outside of the US stock market as the world’s biggest economy is showing signs of slowing. 

For more on equity markets:

• Markets Test ‘Pain Point’ for Policy Reaction: Taking Stock
• M&A Watch Europe: Allianz, Grab, Stada, Spie, Exosens, Iveco, BT
• Sweden’s Asker Braves Choppy Easter IPO Window: ECM Watch
• US Stock Futures Unchanged; Harrow, Lucid Gain
• Astra Beefs Up: The London Rush

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—With assistance from Kit Rees and Michael Msika.

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