Shares of weapons companies surged across Europe, leading to the UK’s benchmark stock index reaching a record high amidst discussions of increased defense spending. The FTSE 100 index, representing the most valuable companies on the London Stock Exchange, hit an unprecedented level as BAE Systems witnessed a 17.5% surge in share price on Monday, reaching a record high.
This surge in share price added approximately £5.92bn to BAE Systems’ total value on Monday from the close of trading on Friday. Additionally, Rolls-Royce Holdings, a defense and aerospace firm, experienced a 6% rise in stock price on Monday.
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Further contributing to the FTSE 100’s growth was the defense technology company QinetiQ and defense support business Babcock International, which saw increases of 10.3% and 9.3%, respectively.
The positive trend was not limited to British arms businesses, as stocks in similar companies across Europe also saw an upsurge. Germany’s largest defense company, Rheinmetall, saw an 18% jump in shares, while Italy’s Leonardo experienced a 15% increase.
A Europe-wide phenomenon
The expectations of heightened defense spending arose after European leaders convened in London to discuss increased funding for Ukraine in its conflict against Russia and the potential for an EU-supported peace agreement.
Reasoning behind the surge
Prime Minister Sir Keir Starmer unveiled a loan to Ukraine and a £1.6bn deal for a Belfast factory to supply missiles for the country’s defense against Russia. Starmer proposed a coalition of European and other allies to safeguard a potential deal for Ukraine, ensuring peace and boosting military expenditure to achieve this objective.
These statements were made during a summit of EU leaders, alongside representatives from Canada and Turkey. The urgency of the discussions heightened following a tumultuous meeting and diplomatic breakdown between President Donald Trump and Volodymyr Zelenskyy at the White House on Friday.
The UK had previously announced an increase in military spending to 2.5% of GDP by 2027. Chancellor Rachel Reeves also disclosed an additional £2.26bn for the Ukrainian war effort, financed by profits obtained from frozen Russian sovereign assets since the commencement of the full-scale war in February 2022.