(Reuters) -European defence company shares rose for a second day on Tuesday, after U.S. President Donald Trump paused military aid to Ukraine.
The moves follow a sharp rally on Monday after the clearest sign yet Europe’s leaders were racing to boost spending and help secure peace in Ukraine.
The European Commission proposed on Tuesday new joint borrowing as part of an overall 800-billion euro ($843.44 billion) financing effort to boost Europe’s defence capabilities.
An index of aerospace and defence companies was up 0.8% to new record high at 1224 GMT, an outlier in a sea of red, with region-wide STOXX 600 dropping 1.4%, as U.S. tariffs on Canada, Mexico and China took effect.
“With recent rhetoric from the U.S. administration suggesting a significant reduction in defence support to Europe, it is easy to envision European defence spending far exceeding the 2% threshold,” Marcus Gavelli, an analyst at Pareto Securities said.
He cautioned, though, that with such elevated valuations some stocks were “highly vulnerable to shifts in sentiment, making a broad exposure the safer bet”.
The defence sector has seen a record-breaking run, more than doubling in value since Russia invaded Ukraine in February 2022.
It closed 7.7% higher on Monday, logging its biggest one-day jump since November 2020.
Europe’s biggest defence company by market value, BAE Systems, was up 1%, hovering near Monday’s record high, when it jumped 14.6%.
Germany’s Hensoldt soared 11%, adding to a 22% jump on Monday, while Renk and Rheinmetall were up 7% and 1%, respectively.
France’s Dassault Aviation rose 3% and Sweden’s Saab was up 1.6%.
Europe’s largest defence electronics firm Thales rose 7%, buoyed by an earnings beat.
($1 = 0.9485 euros)
(Reporting by Isabel Demetz and Anna Pruchnicka in Gdansk; Editing by Amanda Cooper)
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