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Shares in European defence companies rallied on Monday, led by Germany’s Rheinmetall, as investors bet that governments across the region would invest more in their own security.
Rheinmetall was up 9 per cent in early trading in Frankfurt, BAE Systems rose 5 per cent in London and Thales climbed 4 per cent in Paris. The Stoxx Europe aerospace and defence index has hit its highest level in more than 30 years.
The sector-wide bounce comes as European leaders gathered in Paris to work out how to respond to US President Donald Trump’s decision to start talks with Russia’s Vladimir Putin on ending the war in Ukraine.
Since returning to the White House, Trump has ratcheted up the pressure on European allies to boost their defence spending beyond a Nato target of 2 per cent of GDP, floating 5 per cent as a new target — which at present only Poland is close to reaching.
Senior politicians across Europe have in recent days committed to spending more on defence.
Speaking to Reuters on Friday, Rheinmetall’s chief executive Armin Papperger said the company would grow more than previously expected.
In an interview with the Financial Times this month, Papperger said: “It takes size to be able to play in the same league as the American arms companies . . . To meet the high demand in Europe, we need arms production on an industrial scale — this is also what politicians are calling for.”
Until Russia’s full-scale invasion of Ukraine almost three years ago, European investors had been wary of backing the defence sector due to ethical concerns.
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