European weapons company share prices surged on Monday as investors anticipated significantly higher spending after the UK and France led an effort to form a peace deal for Ukraine.
Britain’s BAE Systems rose by as much as 17% on Monday morning, Germany’s Rheinmetall gained 14%, France’s Thales increased 16% and Italy’s Leonardo was up 10% in early trading.
The moves continued a steep rally in defence company share prices as investors expect big increases in defence budgets by European countries who fear that US president Donald Trump will withdraw security guarantees.
Trump has shocked long-term US allies around the world by claiming that Ukraine is not “ready for peace”, three years after Russia launched a full-scale invasion of the country, and threatening to withdraw US support for the country after a public meeting with Ukrainian leader Volodymyr Zelenskyy descended into acrimony.
Keir Starmer on Sunday said Europe is “at a crossroads in history” as he hosted a summit in London with Zelenskyy and 18 other leaders, including France’s Emmanuel Macron, to try to form a peace deal that will support Ukraine.
Defence bosses in Europe have long argued that weapons spending should be higher, and the prospect of the US removing its support has made politicians pay attention.
Shares in aerospace companies with significant defence revenues also rose on Monday morning. European passenger jet maker Airbus rose by 3%, France’s Safran rose by 2.7%, while the rally added to Rolls-Royce’s momentum after the British jet engine manufacturer sent investors into raptures last week with strong results. Rolls-Royce shares gained 6% on Monday, hitting a new record high.
British defence technology company QinetiQ rose by 8%, while France’s Dassault Aviation gained 14%.
Holger Schmieding, an economist at Berenberg, an investment bank, said: “Europe and Germany in particular must – and very likely will – raise defence spending for themselves as well as for Ukraine well beyond recent plans. The UK and Norway have already pledged additional support for Ukraine. Germany will probably do so shortly.”
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Starmer announced last week that the UK will raise its spending on defence to the equivalent of 2.5% of GDP by 2027, three years earlier than planned. That is up from 2.3%. The increase in weapons spending will be funded through a deeply controversial cut in international aid spending.
French president Emmanuel Macron called on Europeans to increase annual defence spending to more than 3% of GDP to counter the threat from Vladimir Putin’s Russia. Germany’s likely new chancellor, Friedrich Merz, is also in talks to push through higher defence spending.
Article by:Source: Jasper Jolly
