*

European defence stocks surge on spending plans for

Ukraine

*

Bitcoin surges, Trump talks of crypto reserve

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Markets still unsure if US tariffs will go ahead

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Nikkei rallies 1.7%, S&P 500 futures up 0.2%

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Euro up after European leaders agree to draft a Ukraine

peace

plan

(Updates throughout with European trading)

By Amanda Cooper and Wayne Cole

LONDON/SYDNEY, March 3 (Reuters) - European shares and

the euro rallied on Monday, after European leaders agreed to

draw up a Ukraine peace plan, while bitcoin surged after U.S.

President Donald Trump unveiled plans for a new U.S. strategic

cryptocurrency reserve.

At a summit over the weekend, European leaders agreed to

draft the peace plan to take to the United States, following

President Volodymyr Zelenskiy's clash with Trump in the Oval

Office.

Their acknowledgement of the need to spend more on defence

sent shares in European arms makers soaring on Monday,

which supported the broader equity markets, where sentiment

remains fragile.

There was renewed uncertainty over whether or not imminent

U.S. tariffs would go ahead, while concern about the health of

the U.S. economy has also flared up after a string of soft data

that had seen the closely watched Atlanta Fed GDPNow tracker

swing to an annualised -1.5%, from +2.3%, sparking talk of a

possible recession.

"We're definitely looking at a cooler first quarter and

maybe a significantly cooler first half of the year. And that's

down to two Trump-related factors," Daiwa Capital economist

Chris Scicluna said.

"Number one: uncertainty around tariffs and the extent to

which uncertainty around tariffs dampens business investments

and spending decisions. It's also uncertainty around tariffs

that raises inflation expectations," he said.

Europe's STOXX 600 index rose 0.2% on the day, as

shares in the likes of Rheinmetall, Leonardo

and BAE Systems surged 11% to 15%.

The euro rose 0.4% to $1.0416, having fallen as

much as 0.4% at one point late on Friday, after talks between

Trump and Zelenskiy collapsed.

S&P 500 futures and Nasdaq futures were both

up 0.2%.

CRYPTO SURGE

Bitcoin stole the limelight on Monday, rising by as

much as 20% from last week's lows below $80,000 after Trump

announced on social media five digital assets he expected to

include in a new reserve, including bitcoin, ether, XRP

, solana and cardano.

Trump provided no detail on how the fund would work, but it

was enough to revitalise the crypto bulls, who took a serious

knock last week.

"Trump just gave the pump that crypto traders have been

holding out for," said Matt Simpson, senior market analyst at

City Index.

Ether, the second-largest cryptocurrency, pulled back to

$2,448 after climbing 13% a day earlier.

CLOUDY OUTLOOK

The European Central Bank meets on Thursday and is widely

expected to cut interest rates, although there is less

conviction over what the central bank might signal about the

outlook for monetary policy, given the geopolitical backdrop.

Expectations around the Federal Reserve are even more

uncertain now. Futures are pricing in 60 basis points' worth of

cuts this year, from barely pricing in 25 bps just a couple of

weeks ago.

Concern about the economic outlook deepened on Sunday when

U.S. Commerce Secretary Howard Lutnick said tariffs on Canada

and Mexico would go into effect on Tuesday, but that Trump would

determine whether to stick with the planned 25% level.

An extra 10% levy on Chinese imports is also due to come

into effect this week, just as the country's National People's

Congress opens its third annual session on Wednesday where

stimulus measures and possible reprisals against the United

States could be announced.

"As with other Trump tariff announcements so far, it's hard

to know if this is a bluff or a genuine turn in policy," said

JPMorgan economist Michael Feroli.

By Monday, the Canadian dollar and the Mexican

peso were trading a touch stronger on the day, both up

0.25% against the U.S. dollar.

The next major macro event is the January U.S. payrolls

report due on Friday. Fed Chair Jerome Powell is due to speak

just a few hours after the jobs report, and at least seven other

officials will appear this week.

In commodities, gold was last up 0.4% at $2,869 an ounce

, while oil was down 0.4% at $72.49 a barrel.

(Reporting by Wayne Cole; Additional reporting by Stella Qiu;

Editing by Jamie Freed, Jacqueline Wong, Edwina Gibbs and Emelia

Sithole-Matarise)