By Nell Mackenzie

LONDON, Feb 17 (Reuters) - European shares rose to record levels on Monday, led by defence stocks, as the region's top political leaders called for an emergency summit on the Ukraine war amid growing U.S. calls to boost military spending for security.

The pan-European STOXX 600 index .STOXX jumped as high as 0.4%, as a gauge of defence and aerospace stocks .SXPARO surged over 3% to lifetime peaks, having already more than doubled in value since Russia invaded Ukraine three years ago.

Investors expect earnings in the industry to continue to rise strongly, driven by a significant surge in defence budgets to meet new security needs - which analysts have dubbed a "supercycle" for the sector.

"A resolution to the conflict in Ukraine could deliver positive growth impulses for Europe, including improved consumer confidence, lower energy prices, and easier financial conditions," Bruno Schneller, managing director at Erlen Capital Management.

Banks .SX7P were also in demand, up 1.5% and flying to 17-year highs, helped by a rise in bond yields.

French President Emmanuel Macron will on Monday host an emergency summit on Ukraine after U.S. officials suggested Europe would have no role in any talks this week in Saudi Arabia aimed at ending the conflict.

The imminent threat of reciprocal U.S. tariffs has receded until April, but the risk that they might include levies based on value added taxes in other countries was a major worry.

"Trade policy remains a wildcard, with the potential for incremental tariffs and their impact on inflation and growth. While the announced tariffs have not yet materially altered the economic landscape, further escalation could introduce new uncertainties," Schneller added.

The Financial Times reported on Sunday that the European Commission would explore tough import limits on certain foods made to different standards in an effort to protect its farmers, echoing President Donald Trump's reciprocal trade policy.

U.S. markets are shut on Monday for the Presidents Day holiday, keeping trading volumes lighter than usual.

AI ENTHUSIASM

Goldman Sachs has raised its outlook for Chinese growth and stocks, arguing that widespread adoption of AI could raise earnings per share by 2.5% a year over the next decade. It would also lift the fair value of Chinese equity by 15% to 20% and attract $200 billion of fund inflows.

Hong Kong equities retreated from recent highs on Monday, while Chinese stocks ended slightly up as investors started to pocket gains from a tech-driven rally while digesting news from President Xi Jinping's meeting with top tech bosses in Asia.

The Hang Seng index .HIHIS closed flat, China's blue-chip CSI300 index .CSI300 finished up 0.21%.

Tokyo's Nikkei .N225 also steadied with little change on the day after Japan reported surprisingly strong economic growth of an annualised 2.8% for the fourth quarter. The gains were limited by a further rise in the yen to 151.65 JPY=EBS per dollar.

South Korean shares .KS11 added 0.6% and Taiwan's .TWII rallied 1.5%.

DOLLAR NOT SO EXCEPTIONAL

A holiday in U.S. markets made for thin trading, though the S&P 500 futures ESc1 and Nasdaq futures NQc1 rose 0.2%.

S&P 500 ended Friday up 1.5% on the week, while the Nasdaq gained 2.6%. .N

The week ahead is filled with key data releases, including February flash business activity data across the globe while in Europe, markets also have their eye on German elections this weekend.

The euro was little changed around $1.05 EUR=EBS, while the dollar slipped almost 0.5% tpo 151.63 yen JPY=EBS.,

The pound held steady at around $1.2590 GBP=D3, just below its highest level in two months, as investors looked towards employment and inflation data later in the week.

Central banks in Australia and New Zealand are both expected to cut interest rates at policy meetings this week.

In commodity markets, gold came off Friday's record highs at $2,898 an ounce XAU= having rallied for seven weeks straight. GOL/

Oil producer group OPEC+ is considering pushing back a series of monthly supply increases due to begin in April despite calls from U.S. President Donald Trump to lower prices, Bloomberg News reported on Monday, citing delegates. O/R

Brent LCOc1 rose 27 cents to $75.01 a barrel, while U.S. crude CLc1 gained 29 cents to $71.03 per barrel.

(Reporting by Nell Mackenzie; Editing by Ed Osmond)

((Nell.Mackenzie@thomsonreuters.com;;))