Defence Stocks Drive FTSE 100 To New Heights
- This topic has 0 replies, 1 voice, and was last updated 1 week ago by
.
-
Topic
-
The FTSE 100 index rallied to an all-time high on Monday, March 3, 2025, rising 0.4% to 8,841 points in early trading.
This surge was primarily driven by a remarkable performance in defense stocks, as European countries signalled their intention to increase military spending following a weekend summit on Ukraine hosted by UK Prime Minister Keir Starmer.
BAE Systems led the charge, with its shares soaring by 15% to a new record high above 1,650p.
This unprecedented rally in BAE’s stock price was fuelled by optimism surrounding potential increases in UK and European defence budgets.
Other defence-related stocks also saw significant gains, with Rolls-Royce Holdings rising 5%, continuing its momentum from last week’s strong results.
The defence sector’s rally extended beyond the FTSE 100, with FTSE 250 companies also benefitting.
QinetiQ Group jumped 9.5%, Babcock International rose 7.6%, and Chemring Group climbed 6%.
Even small-cap defence stocks experienced substantial gains, with Avon Technologies and Cohort rising 6.5% and 11.5% respectively.
This surge in defence stocks comes in the wake of a European defence summit, where leaders agreed on the need for greater military investment.
The potential relaxation of EU debt rules to accommodate higher defence spending, as suggested by European Commission President Ursula von der Leyen, could further boost the sector.
In the energy sector, Shell saw a modest increase of about 1.2% amid reports of potential asset sales in its chemicals division.
However, not all FTSE 100 components fared well, with Bunzl experiencing a 6% decline following its latest financial report.
The FTSE 100’s strong performance is particularly noteworthy given the current global economic landscape.
Richard Hunter, head of markets at Interactive Investor, noted that the UK market has been attracting investor attention due to its perceived defensive qualities and lack of exposure to mega-cap tech risks and potential tariff threats.
Looking ahead, JPMorgan analysts have raised their 12-month price targets for European defence stocks by an average of 25%, expecting significant increases in consensus estimates and company guidance in the coming months.
This optimism is underpinned by projections that European defence spending could reach 3.1% of GDP by 2029 and 3.5% by 2032.
As geopolitical tensions continue to shape market dynamics, the defence sector’s performance will likely remain a key driver of the FTSE 100’s trajectory in the near term.
Sources: Trading Economics, MarketScreener