Talk of greater defence spending has helped push European markets ahead this morning, with defence stocks among the top risers.
BAE Systems are the top riser on London’s FTSE 100 in early trading, jumping 5.5% to its highest level since late November last year.
Richard Hunter, head of markets at interactive investor, said: BAE Systems shares rose by more than 5%, lifting the price by a cumulative 12% so far this year.
“The possibility of increased military spending has underpinned the sector for some time, with the group being one of the preferred plays in the meantime, with Rolls-Royce also seeing the renewed interest lifting its shares.”
Russ Mould, investment director at AJ Bell, said that comments by secretary general Mark Rutte that NATO members will have to boost their defence spending by ‘considerably more than 3%’ of GDP put a rocket underneath defence stocks.
“Shares in defence companies had already rallied hard since Russia invaded Ukraine as investors took the view that the shocking events would spur governments around the world to fortify their own defences. Rutte’s comments effectively confirm this line of thinking and have acted as another share price catalyst, even though markets had already priced in a stronger earnings environment for the sector. That Donald Trump is keen for European allies to spend as much as 5% of GDP on defence adds to the narrative supporting the sector,” he said.
