Defence stocks across Europe rallied once more on Monday in the wake of Germany’s election and victory for conservative Friedrich Merz.
Merz pledged “independence” from the United States in the wake of his win, adding to speculation that security spending could be ramped on the continent.
BAE Systems PLC (LSE:BA.) was among risers in London as a result, gaining 3.7%, alongside Rolls-Royce Holdings PLC (LSE:RR.).
Rheinmetall AG, Leonardo and Thales SA were also among those in the green, having enjoyed a rally a week ago on speculation of growing defence spending.
Merz has been left needing to form a coalition government after the election, which Deutsche Bank analysts noted would most likely feature Olaf Scholz’s SPD.
“The most immediate issues in the coalition talks will be immigration as well as defence,” Deutsche said.
“In our view, Europe's challenged security architecture makes it highly likely for CDU/CSU and SPD to agree on higher defence spending in principle.”