"I still like European defence as a theme. The rearmament story is yet to really even begin and whilst we have seen a material rerating in several large defence names on the continent and in the UK, a selloff in the autumn on some fuzzy 'Ukraine peace deal hope' trade is overdone and fails to capture the long-term value in the sector."
"Over in the US, President Trump vowed to increase the defence budget by 50% to $1.5tn, but also said he would not permit dividends and stock buybacks for defence companies. Raytheon fell over 2% and Lockheed was down almost 5% but both rallied sharply in after-hours trading. A massively larger defence budget should be good news for Palantir."
Tensions over Greenland sharpened investor focus on defence and rare earths, driving British and European defence stocks higher. BAE Systems jumped over 6%, taking five-day gains to about 20%, while Babcock rose 17% over the week with a 1.6% rally this morning. Rheinmetall, Renk and Leonardo were notable continental gainers. The rearmament story remains in early stages, with recent selloffs seen as overdone and long-term sector value intact. Expectations that Russia may regenerate forces and Europe will materially raise defence spending support the theme. In the US, a proposed 50% defence budget increase and restrictions on buybacks add complexity for defence equities.
Read at London Business News | Londonlovesbusiness.com
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