Defence stocks surged in early trading as Europe prepares to boost military spending amid efforts to secure peace in Ukraine.
BAE Systems on the FTSE 100 climbed as much as 18.5%, while Dassault Aviation on the Euronext in Paris jumped 19% following a European summit in London chaired by Sir Keir Starmer over the weekend.
The FTSE 100 reached a new record high after French President Emmanuel Macron announced that France and Britain would propose a one-month truce in Ukraine, covering both air and naval operations. Macron told Le Figaro that European ground troops would only be deployed in a second phase of a potential peace agreement.
Meanwhile, government borrowing costs edged higher as the prospect of increased defence spending weighed on bond markets. Germany’s 10-year bund yield, the eurozone benchmark, rose four basis points to 2.43% in early trading, rebounding from Friday’s more than two-week low of 2.37%.
At the summit, European leaders agreed on the need for greater defence investment. European Commission President Ursula von der Leyen suggested the EU could relax existing debt rules to accommodate higher military spending, a move that could unsettle bond investors.
BAE Systems Soars to Record High as Defence Stocks Rally
BAE Systems posted its largest single-day gain on record as the defence sector surged. Shares in the weapons and fighter jet manufacturer jumped as much as 18.5%, reaching an all-time high and helping the FTSE 100 climb 0.5% to a new peak of 8,852.71.
Rolls-Royce followed closely behind on the blue-chip index, rising 6.6% as investors flocked to defence stocks.
The rally extended across the sector, with QinetiQ leading the FTSE 250 with a 10.5% gain, while Babcock International climbed 9.8% and Chemring advanced 8.6%.
Among small-cap stocks, Avon Technologies, a maker of helmets and gas masks, rose 8.5%, while Cohort, a specialist in sonar, torpedo, and communications systems, surged 12%.
