The rally in European defence stocks accelerated dramatically yesterday as leaders vowed to boost military spending.
Shares in FTSE 100 giants Rolls-Royce and BAE Systems soared to record highs after an emergency summit on Ukraine at the weekend.
And an index tracking European aerospace and defence shares also hit an all-time high.
Analysts at JP Morgan said the Continents’ drive to re-arm its military forces has been ‘turbocharged’.
It follows a heated White House meeting between Ukrainian President Volodymyr Zelensky and Donald Trump last week, which increased a sense of urgency for Europe to act faster on security spending.
At an urgent summit in London on Sunday, Keir Starmer pledged to build a ‘coalition of the willing’ to defend a peace deal in Ukraine.
Military spending: Shares in FTSE 100 giants Rolls-Royce and BAE Systems soared to record highs after an emergency summit on Ukraine at the weekend
Addressing leaders from France, Germany, Canada, Italy, Nato and the EU, the Prime Minister said Europe must do the ‘heavy lifting’ on defence.
He unveiled a £1.6billion deal to allow Ukraine to buy more than 5,000 missiles to be made by French defence giant Thales in Belfast.
That came after Chancellor Rachel Reeves used profits from frozen Russian assets to fund a £2.3billion loan scheme to help Kyiv buy weapons.
The summit was attended by Zelensky, who later met the King at Sandringham.
It was a show of solidarity following his dramatic clash with Trump in the Oval Office.
The televised row sparked fears of an irrevocable rupture between the two leaders and reinforced the need for European nations to bolster their own security. RBC Capital Markets analyst Peter Schaffrik said it was ‘an inflection point’.
‘The whole Zelensky-Trump meltdown has fast-forwarded everything,’ he said.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said the clash had ‘brought the need for Europe to increase collective security into sharp focus’.
And the European summit had ‘a direct read-across to defence stocks on the markets’, said Russ Mould, investment director at broker AJ Bell. Rolls-Royce shares rose 4.4 per cent, or 32.8p, to 776.8p, an all-time high.
And BAE Systems – Europe’s biggest defence firm – saw its stock surge 14.6 per cent, or 205p, to a new peak of 1611.5p.
Shares in QinetiQ – the high-tech company that was spun out of the Ministry of Defence and is the inspiration for Q in James Bond – jumped 12.9 per cent.
Chemring, which has reportedly recently rebuffed a £1.1billion takeover swoop from US buyout firm Bain Capital, saw shares rise 7.4 per cent. Security firm Babcock’s stock rallied 6 per cent.
In Europe, shares in Italian defence giant Leonardo leapt 16.1 per cent, German firm Rheinmettall saw its stock jump 13.7 per cent to a record high and Thales’ stock rocketed 16 per cent.
Starmer last week pledged to increase the defence budget from 2.3 per cent to 2.5 per cent of GDP and Rachel Reeves has relaxed the rules to allow Britain’s £28billion sovereign wealth fund to invest in defence.
‘We believe that this is likely to be the beginning of a fundamental realignment that will shape markets for the foreseeable future,’ said Nigel Green, boss of financial advisory firm deVere Group.
‘Governments across Europe are coming to terms with the fact that their decades-long reliance on US military backing can no longer be taken for granted.’
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