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Shares of European arms manufacturers rose sharply on Monday amid expectations of increased defence spending in the region. According to Morningstar, this was the result of the agreements of European leaders during the summit in London on more active financing of the military sphere.
In addition, the media reported that the parties negotiating the formation of a new German government are considering investing hundreds of billions of euros in the defence industry. Growing demand for military products led to an increase in the SXPARO defence index by more than 6%, which was a new record.
Increasing defence spending in Europe
The SXPARO index has more than doubled since Russia’s invasion of Ukraine three years ago. JPMorgan analysts note that the events of the past two weeks have significantly accelerated the process of European rearmament. European NATO countries plan to increase their own production of military equipment and reduce imports from the United States.
“There are 30 European NATO member states, and we expect many of them to commit to significant increases in military spending in the near future,” the analysts’ report says.
Sharp rise in shares of arms manufacturers
- BAE Systems (UK) – +13% at the time of publication.
- Hensoldt (Germany, manufacturer of sensors for the Eurofighter) – +22%.
- Rheinmetall (manufacturer of Leopard 2 tanks) – +12%.
- Thyssenkrupp and Renk – +15%.
- Leonardo (Italy) – +11%.
- Saab (Sweden) – +10%.
- Thales and Dassault Aviation (France) – +12% and +14% respectively.
Britain increases arms supplies to Ukraine
The United Kingdom has announced an order for 5,000 LMM multirole missiles for Ukraine, tripling missile production at Thales’ Belfast plant. The company is not commenting on the details of the deal until the publication of its annual financial report.
Forecast of growth in NATO military spending
According to BofA Global Research, NATO members (excluding the United States) will spend about $450 billion on defence in 2024. If each country increases spending to 3% of GDP, this amount could rise by another $250 billion.
