Published by Global Banking & Finance Review®
Posted on June 26, 2025
2 min readLast updated: January 23, 2026
Add as preferred source on GoogleEuropean defence stocks rise as NATO commits to increased spending, with Rheinmetall and Fincantieri leading gains.
(Reuters) -Shares in European defence firms edged up on Thursday after NATO leaders on Wednesday backed the increase in defence spending demanded by U.S. President Donald Trump.
As of 0814 GMT, German contractor Rheinmetall and Italy's Fincantieri, which on Thursday said it received an order worth 700 million euros ($820.89 million), were the top gainers, up between 3% and 6%.
A broader European defence index, which this year has rallied 49% on the back of a changed stance towards the sector in Europe, was up 1.3%.
Countries on Wednesday pledged to spend 3.5% of GDP on core defence and 1.5% on broader defence-related measures, a jump worth hundreds of billions of dollars a year from the current goal of 2% of GDP.
However, J.P. Morgan analysts say that the market is lukewarm to the targets, which are to be achieved over the next 10 years.
"The European defense companies we cover and the European defense investors we speak with do not believe that most European countries will be able to spend 3.5% of GDP on core defense in the next 5-10 years," they wrote in a note to clients.
Tom Guinchard, equity research analyst at Pareto Securities said the focus for defence companies would be Northern Europe, Germany and the Baltics, which are most likely to reach the targets.
"Already last week, we saw Spain get the exception," said Guinchard. "France will have difficulties leveraging up to 3.5% of GDP and most of the southern countries are going to be quite hesitant."
($1 = 0.8527 euros)
(Reporting by Paolo Laudani, Ozan Ergenay and Anna Pruchnicka in Gdansk; Editing by Matt Scuffham)
European defense stocks rose after NATO leaders backed an increase in defense spending as demanded by U.S. President Donald Trump.
NATO countries pledged to spend 3.5% of GDP on core defense and 1.5% on broader defense-related measures, significantly increasing from the previous goal of 2%.
German contractor Rheinmetall and Italy's Fincantieri were the top gainers, with shares rising between 3% and 6%.
Analysts from J.P. Morgan express skepticism, suggesting that most European countries may struggle to meet the 3.5% GDP spending target within the next 5-10 years.
According to Tom Guinchard from Pareto Securities, Northern Europe, Germany, and the Baltics are most likely to meet the defense spending targets.
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