By Cristina Gallardo

European defense stocks are on the rise following remarks from North Atlantic Treaty Organization allies about the need to boost Western defense budgets significantly to continue to support Ukraine and deter Russia from any potential attacks against NATO territory.

Shares in Germany's Renk Group jumped 12% to 28.08 euros in early trade Monday, while Rheinmetall's rose 8.4% to 885.8 euros, and Hensoldt's were up 6.5% at 43.33 euros.

In the U.K., BAE Systems advanced 5.25% to 12.93 pounds, while QinetiQ rose 3.4% to 3.81 pounds. In France, shares in Thales grew 3.75% at 171.55 euros, and in Dassault Aviation rose 3.8% 227.20 euros. Italy's Leonardo was up 4.3% at 33.05 euros and Sweden's Saab also gained, up by 6.5% at 260.5 Swedish krona.

The rises came after comments made during the Munich Security Conference, which signaled that NATO could be set to commit to a much higher defense spending target when it meets in the Hague for its annual summit on June 24-25.

NATO Secretary General Mark Rutte said the alliance's spending target would be "considerably more than 3%" of GDP, up from its current target of 2% agreed upon in 2014, and that its members would need to commit to a "strong timetable" at the Hague summit.

A new NATO spending target would trigger an expansion of Europe's defense industry, with the continent's leaders likely to aim to buy European weapons and platforms rather than only those made by the U.S., Citi analyst Sam Burgess said.

European Commission President Ursula von der Leyen, meanwhile, told the conference that the 27 members of the EU currently spend a combined 2% of their GDP on defense, but this would need to increase by "hundreds of billions of euros" in additional investment every year.

She said the EU's executive arm wants to exempt defense from EU government spending limits, and proposed a package of tailor-made solutions to help member states address specific barriers preventing them from boosting their defense expenditure.

Defense stocks were also boosted by an emergency meeting of key European leaders in Paris on Monday, convened by French President Emmanuel Macron to discuss defense capabilities in Europe and what their governments could offer Ukraine as security guarantees in the event of a ceasefire in its war against Russia. Ceasefire talks are set to kick off in Saudi Arabia in the coming days, involving U.S., Russian and Ukrainian officials.

Macron is expected to be joined at the Paris meeting by the leaders of Germany, the U.K., Italy, Poland, Denmark, Spain, the Netherlands Prime Minister as well as Rutte, the EU's von der Leyen and European Council President Antonio Costa.

Ahead of the discussions, U.K. Prime Minister Keir Starmer said he would be prepared to send British troops to Ukraine if there were a ceasefire deal with Russia. Writing in the Telegraph newspaper, the Labour leader also restated his government's multiyear commitment of delivering 3 billion pounds of military support to Ukraine.

Write to Cristina Gallardo at cristina.gallardo@wsj.com

(END) Dow Jones Newswires

February 17, 2025 04:12 ET (09:12 GMT)

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