LIVE MARKETS-Defence stocks have 'more rounds to fire' - Berenberg

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DEFENCE STOCKS HAVE 'MORE ROUNDS TO FIRE' - BERENBERG

European defence has kicked off 2026 at full speed, and with U.S. action in Venezuela and the dispute over Greenland driving geopolitical uncertainty to new heights, Berenberg says the sector still has "more rounds to fire."

The German bank sees these developments adding momentum to expectations for a decade-long defence budget upcycle in Europe, with NATO Europe and Canada forecast to lift spending by 8% annually to reach $1.2 trillion by 2035.

And as contracts flow in, share prices in the space should follow suit, argue Berenberg analysts led by George McWhirter, who raised targets on most stocks under coverage including BAE Systems BAES.L and Dassault Aviation AM.PA.

"Each company has a healthy pipeline of order opportunities... Conversion of this backlog orders will act as catalysts for each stock in 2026," they write in a Jan 9 note. In 2025, Europe's defence sector had a book-to-bill ratio of 1.4 times, flat from 2024.

Also, Berenberg notes defence screens "more attractively" than civil aerospace, trading at around 17% P/E discount on 2030's forecast earnings despite higher expected EPS growth.

(Danilo Masoni)

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