(Reuters) -European defence stocks jumped on Wednesday, giving a fresh boost to this year’s rally, after U.S. President Donald Trump, in a sudden and surprising rhetorical shift, said he believed Ukraine could retake all its land occupied by Russia.
Kyiv should act now with Moscow facing “big” economic problems, Trump wrote on Truth Social on Tuesday, shortly after meeting Zelenskiy on the sidelines of the U.N. General Assembly in New York. The U.S. President has previously suggested Kyiv should consider giving up territory in order to make peace.
An index of aerospace and defence companies was up 1.1% at 0803 GMT, hovering near its record highs and outperforming region-wide STOXX 600, which was down 0.4%. The defence index has risen more than 200% since Russia launched its war against Ukraine in February 2022.
“On Ukraine winning back its territory seems a notable shift from only a few weeks ago when he was set on doing land deal with Putin without Ukraine. This alone is a significant shift in the optics and could indicate war goes on longer (and) U.S. support for Nato is solid,” said Neil Wilson, UK Investor Strategist, Saxo Markets. “At the same time, the rising tensions between NATO and Russia are a clear trigger for defence stocks to be bid,” he added.
Defence stocks have been a large force behind the 9% rise in the STOXX 600 this year, hitting successive record highs on the back of the prospect of a swell of government spending on regional security.
NATO countries pledged in June to spend 3.5% of GDP on core defence and 1.5% on broader defence-related measures, a jump worth hundreds of billions of dollars a year from the current goal of 2% of GDP.
“U.S. President Trump’s about-face on Ukraine policy is bringing defence stocks into play today,” Jochen Stanzl, analyst at broker CMC Markets, said.
Tom Guinchard from Pareto Securities also pointed to recent news of Norwegian and Danish airports shutdowns because of drone threats.
Still, there was no sign that latest Trump’s comments would be matched by a change in U.S. policy, such as a decision to impose the heavy new sanctions on Moscow sought by Ukrainian President Volodymyr Zelenskiy, who travelled to New York this week.
Europe’s biggest defence company by market capitalisation BAE Systems was up 1.4%. Rheinmetall, Europe’s biggest ammunition maker, rose around 2%.
Sweden’s Saab was up around 5% to its highest since mid-July, also buoyed by a local media report that Germany was open to buying its surveillance aircraft Global Eye.
Spanish defence and technology firm Indra rose around 3%.
Hensoldt, which provides sensor systems for the Eurofighter, was up 4.6%, while Renk and Italy’s Leonardo both rose around 3%. France’s Thales and Dassault Aviation were up between 1.6% and 1.9% each.
(Reporting by Joice Alves in London and Anna Pruchnicka in Gdansk; additional reporting by Stefanie Geiger and Ozan Ergenay, editing by Dhara Ranasinghe and Amanda Cooper)
