European aerospace and defence sector surges by €18bn to record high
And finally… the surge in share prices of weapons makers today has driven an index of defence companies up to a new all-time high.
The STOXX Europe Total Market Aerospace & Defense index has jumped by 4.4% today. That lifts the total value of all the companies on the index from €417.4bn to €435.7bn, a gain of over €18bn, or £15bn.
As we’ve been covering through the day, analysts are anticipating a jump in military spending, as NATO members are pushed to increase defence spending as a share of their economy and Europe responds to the rupture with the Trump White House.
vp vance in munich was motivating to convince europeans of the unreliability of the americans.
— ian bremmer (@ianbremmer) February 17, 2025
you probably don’t get the uk troop commitment without the vance speech.
Shares in Britain’s BAE Systems continued to rally though the day, and have closed up 9% tonight, lifting its value alone by £3.3bn.
As covered earlier (see here), weapons makers across Europe have rallied – Rheinmettal closed 14% higher, Thales gained 7.8%, Thyssenkrupp jumped by a fifth and Saab rose by 16%.
This chart, from Deutsche Bank, shows how UK defence spending has fallen over recent decades, as a share of overll spending:
As their strategist Jim Reid explain, that could be about to change:
Going forward, it seems increasingly clear that defence spending will have to increase. You’ll get a lot more idea of how much, and how this could be funded in the links below. However, there’s little political appetite to reduce the welfare state, so Europe in particular may have to sign up for higher government spending. Even in Germany, once the election is out the way on Sunday there should now be the political consensus for this.
So the last four days could easily mark a major turning point in Europe’s future with many macro and geopolitical implications.
European leaders will be weighing this issue up in Paris right now, as they hold an emergency summit.
Our Europe liveblog has all the action:
Goodnight. GW
Updated
European defence stock values surge
More than £10bn has been added to the value of Europe’s defence industry today, as investors anticipate a surge in military spending.
Weapons makers are leading the risers on many of Europe’s stock exchanges today, as leaders from major European powers prepared to meet in Paris for emergency talks on the Ukraine war.
Last week’s shock move by the US to sideline Kyiv and its European backers from peace negotiations has prompted expectations that Europe must spend more on defence.
Before today’s summit Ursula von der Leyen said the issue was “about Ukraine – but also about us. We need an urgency mindset. We need a surge in defence. And we need both of them now.”
The British prime minister, Keir Starmer, echoed her sentiments, telling reporters before heading to the French capital:
“This isn’t just about the frontline in Ukraine. It’s the frontline of Europe and of the UK. It’s about our national security.”
Traders across Europe have been swift to react.
In London, BAE Systems’ shares are up 7.7% in late trading. That adds £2.8bn to its market capitalisation, lifting it from £36.9bn to £39.7bn.
Shares in German arms maker Rheinmetall are up over 10% to a record high, lifting its value from €35.5bn (£29.5bn) to €39bn (£32.5bn), a gain of £3bn.
Thyssenkrupp, which provides systems for submarines, surface ships, and maritime electronics, jumped by 20% – adding around £500m to its value.
France’s Thales jumped 7.2%, taking its value up from €34bn to €36.5bn, up £2bn.
In Italy, aerospace and defence firm Leonardo gained 7.7%, taking its value from €18.2bn to €19.6bn, up £1.1bn.
Sweden’s Saab has surged 15%, adding 20bn Swedish crowns (£1.5bn) to its value.
These moves have lifted the Europe’s aerospace and defence index by 4% to an all-time high today – the index has more than doubled in value since Russia invaded Ukraine three years ago.
As covered earlier, European government bond yields – a measure of borrowing costs – have also risen today as investors anticipate higher defence spending.
Kathleen Brooks, research director at XTB, says:
The markets are once again being driven by geopolitics, this time it’s the bond market. European bond yields have jumped at the start of trading on Monday, as the EU is set to announce an overhaul of defence spending after next week’s German election.
This is good news for global defence stocks, and European markets have opened higher on Monday, but not such great news for bonds, as investors weigh up the impact on Europe’s debt pile.
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