LIVE MARKETS-European defence: "This is just the start of a super-cycle"

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EUROPEAN DEFENCE: "THIS IS JUST THE START OF A SUPER-CYCLE"

That defence stocks could see a knee-jerk fall in a Ukraine ceasefire scenario has been a given for a quite some time. But this same theory also assumes that any sizeable drop could open up a rare buying opportunity.

Price action today has followed this script.

News that U.S. President Donald Trump has kicked off talks to end the almost 3-year-old war sparked falls across the sector but after just a few hours of trading, Europe's top defence names were all trading in the black.

It looks that dip buyers have done their job fast.

Defence budgets are on the rise and with the White House looking to scale back U.S. military support in Europe, investors are betting on a steep rise in NATO members' spending plans.

"This is just the start of a multi-year super-cycle," wrote Mediobanca Securities this week, noting Trump’s vocal demand to lift the NATO spending target to 5% of GDP in defence from 2%.

"Ukraine – and its closest allies, are likely to use any peace agreement to substantially restock its arsenal, including ammunitions tanks, air defence systems and jet fighters."

(Danilo Masoni)

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