Defense Shares Soar as Germany Ups Spend, Rheinmetall Rises 31%

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Defense Shares Soar as Germany Ups Spend, Rheinmetall Rises 31%
Credit: © Reuters.

By Dhirendra Tripathi – Stocks of European defense manufacturers soared Monday as Russia’s invasion of Ukraine forces European governments to have a relook at their preparedness, including a reconsideration of their established doctrines.

Rheinmetall AG (DE: RHMG ) shares surged 31% in Frankfurt as German Chancellor Olaf Scholz decided to sharply increase its spending on defense to more than 2% of its economic output.

Thales (PA: TCFP ) was up 13% in Paris, while Leonardo (LON: 0ONG ) and BAE (LON: BAES ), both listed in London, traded around 16% and 14% higher, respectively.

Since the end of the Second World War, Germany has long refrained from getting involved in conflicts, resisting pressure to raise its defense spending in the light of its military past and resulting strong pacifism within its population.

Scholz said the government had decided to more than double last year’s military investment to 100 billion euro in the 2022 budget.

Germany could purchase U.S. F-35 fighter jets built by Lockheed Martin (NYSE: LMT ) to begin with, Reuters quoted Scholz as saying. Lockheed shares were up 4.4% on NYSE in premarket trading.  

But the next generation of fighter jets and tanks must be built in Europe jointly with European partners, particularly with France, he said.

As Germany reverses its policy, pressure on governments in other European nations could mount too, considering the heightened geopolitical risks in the region and the lack of unity among countries on critical security issues.

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