Key points
- Trump tells EU to boost defence budgets
- Investors were previously wary of backing defence sector
- US-Russia talks make headways
ISLAMABAD: Shares in European defence companies hit record highs as investors bet that governments will have to shoulder more of the burden for the continent’s security by increasing military spending.
Rheinmetall jumped 14 per cent in Frankfurt, while BAE Systems rose 9 per cent in London and Thales climbed 7.8 per cent in Paris, according to the Financial Times.
The Stoxx Europe aerospace and defence index hit its highest level since at least the early 1990s.
US President Donald Trump side-lined Kyiv and its European backers last week by calling his Russian counterpart Vladimir Putin to discuss beginning negotiations to end the conflict.
European fears
With fears that Europe could be side-lined in negotiations to end the three-year war, European leaders were gathering in Paris amid talk of greater defence spending.
CMC Markets analyst Konstantin Oldenburger told AFP the company’s stock faced a short squeeze, where investors who bet on it falling had to buy it to cover their losses, driving it higher still.
“With today’s double-digit gain, the defence contractor has increased in value by nearly a third since last Wednesday,” he noted.
Analysts were cautious, however, over the prospect of higher European defence spending and its economic consequences.
With today’s double-digit gain, the defence contractor has increased in value by nearly a third since last Wednesday.” – CMC Markets analyst Konstantin Oldenburger
“There is a fear that the breakdown in military ties between the US and Europe will necessitate a huge ramp-up in defence spending, thus pushing debt and borrowing costs higher once again,” said Joshua Mahony, chief market analyst at Scope markets.
Hefty blow
It adds to the uncertainty on trading floors since Trump returned to the Oval Office last month announcing a series of tariffs against key trading partners.
While some of the measures have been delayed for negotiations, observers warn the imposition of huge levies on exports to the world’s biggest economy could deal a hefty blow to financial markets.
Hong Kong was barely moved after last week’s rally fuelled by a surge in tech firms following the release of Chinese startup DeepSeek’s chatbot.
“DeepSeek proves that China’s private sector remains innovative and competitive, and it also shows the possibility for China’s continued AI advancement,” said analysts at Bank of America Global Research.
Hopes of fresh support
Still, the mood in Hong Kong was improved by news that Chinese President Xi Jinping was meeting Alibaba co-founder Jack Ma and other top entrepreneurs.
The gathering on Monday fuelled hopes of fresh support for the private sector, which has been hit by a series of crackdowns by the Chinese government in the past few years, hammering share prices.
Ma’s inclusion hints at the billionaire magnate’s potential public rehabilitation after years out of the spotlight following a tangle with regulators.
Other participants included Ren Zhengfei — the founder of tech titan Huawei — and Wang Chuanfu, who established electric vehicle giant BYD.
Tokyo edged up as data showed the Japanese economy slowed sharply last year but enjoyed a forecast-topping final quarter thanks to strong exports.
