Defence stocks fire FTSE 100 to record high as Europe prepares to rearm
The FTSE 100 closed at a fresh record high on Monday as a tumultuous weekend for geopolitics sparked a significant rally in defence stocks.
The blue chip index finished up 61.57 at 8871.31, after hitting a new intraday record of 8,908.82 earlier in the session.
Prime Minister Keir Starmer warned in speech on Sunday that Europe is at a historical crossroads as he revealed a ‘coalition of the willing‘, including Britain and France, intended to guarantee the peace and security of Ukraine.
Countries across Europe look set to ramp-up defence spending as the US indicates its intention to withdraw some of its support for the continent.
BAE Systems shares rocketed 15 per cent, as it also benefited from a broker upgrade. Rolls-Royce was up 4 per cent and FTSE 250 Chemring added 7 per cent.
On the continent, Germany’s Rheinmetall soared 14 per cent and Italy’s Leonardo was up 16 per cent.
Susannah Streeter, of Hargreaves Lansdown, said: ‘The shocking clash between Trump, Vance and Zelensky has brought the need for Europe to increase collective security into sharp focus.
‘A show of co-operation among leaders at the weekend in London has reinforced expectations that military budgets will swell in a new era of collaboration to counter the Russian threat.’
Prime Minister Keir Starmer revealed a ‘coalition of the willing’, including Britain and France, intended to guarantee the peace and security of Ukraine.
Morningstar analysts now estimate European defence spending will rise to 3.1 per cent of GDP by 2029 and 3.5 per cent by 2032, up from previous forecasts of 2.4 and 2.8 per cent, respectively.
The group highlights Rheinmetall, Leonardo and Sweden’s SAAB as its top investment picks to benefit from increased spending.
Loredana Muharremi, equity analyst at Morningstar, said: ‘With more pressure for Europe to increase its defence budgets and prioritise local R&D and production, we’re seeing long-term opportunities for companies like SAAB, Leonardo, and Rheinmetall to not only support heightened military capabilities but also contribute significantly to economic growth through job creation and innovation.’
Richard Hunter, head of markets at Interactive Investor, said: ‘With neither particular exposure to the mega cap tech risks nor indeed, at least for the moment, to tariff threats, the UK has ploughed ahead, with the premier index increasingly garnering investor attention given its perceived defensive qualities.’
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