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Euro zone manufacturing expands in August, PMI data shows

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Norway's Equinor backs Orsted's plans to raise capital

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Defence stocks lead sectoral gains

(Updates after markets close)

By Johann M Cherian, Tristan Veyet and Nikhil Sharma

Sept 1 (Reuters) - European shares finished marginally

higher on Monday, supported by defence stocks, while Novo

Nordisk gained after data showed its weight-loss drug Wegovy

delivers stronger heart-protective benefits than Eli Lilly's ( LLY )

rival therapies.

The pan-European STOXX 600 closed up 0.17% at

551.07, with gains led by the aerospace and defence index

, which surged 2.1% to hover near a record high.

Defence giants, Rolls-Royce Holdings, Rheinmetall

and Hensoldt advanced between 2.8% and 4.5%.

Gains followed a Financial Times report that European

Commission President Ursula von der Leyen said Europe was

preparing "pretty precise plans" to send troops to Ukraine as

part of post-conflict security guarantees.

"The possibility of additional support for Ukraine can only

be beneficial as far as (European) stocks are concerned and

investors are really buying into that," said Fiona Cincotta,

senior market analyst at City Index.

Britain's BAE Systems was up 1.8%, as Norway said

it had chosen Britain for the acquisition of new frigates, in a

deal worth some 10 billion pounds ($13.51 billion).

Danish drugmaker Novo Nordisk, the fourth-largest

healthcare company on the STOXX index, rose 1.8% after the

company said Wegovy cut the risk of heart attack, stroke or

death by 57% versus Eli Lilly's ( LLY ) rival medicines Mounjaro

and Zepbound in a real-world comparison.

The stock bolstered the healthcare index, rising

0.27%. Denmark's main stock index gained 1.1%, also

aided by Novo's domestic peer Zealand Pharma that

ended 3.5% higher.

Overall gains were limited by a jump in long-dated euro

zone bond yields on persistent worries about government debt

levels around the world.

Germany's 30-year yield rose as much as to a

14-year peak of 3.381% before cooling to 3.36%, up 2 basis

points.

Utilities, often traded as a bond proxy, fell 0.9%

to lead sectoral losses on STOXX 600.

Meanwhile, U.S. tariff policy remained a key focus after a

U.S. appeals court ruled on Friday that most of U.S. President

Donald Trump's tariffs are illegal, but left them in place until

mid-October to permit further appeals.

Trump has vowed to take the case to the Supreme Court and

trade experts say the administration is preparing alternative

plans to be able to proceed with its tariffs.

The European Union has struck a deal with the U.S., while

the Swiss continue to negotiate, although broader trade

uncertainty has subsided since April.

Goldman Sachs was the latest among major brokerages to raise

its STOXX 600 target for the next 12 months, lifting it to 580

from 570.

Orsted gained 3.5% after Norway's Equinor

pledged to support its planned $9.4 billion rights issue as the

Danish offshore wind developer seeks to bolster its balance

sheet as both companies navigate regulatory hurdles in the U.S.

offshore wind market.

On the data front, euro zone manufacturing activity expanded

in August for the first time since mid-2022 due to a surge in

domestic demand and output.

Investors geared up for this week's U.S. jobs report, which

could sway expectations for the Federal Reserve's next policy

move at its meeting later this month.

Trading was light throughout the day due to a U.S. holiday.

(Reporting by Tristan Veyet in Gdansk and Johann M Cherian in

Bengaluru; Editing by Sherry Jacob-Phillips and Mrigank

Dhaniwala)