Defence shares took a knock on Monday as investors cashed in profits across the sector.
Melrose Industries PLC (LSE:MRO, OTC:MLSPF), BAE Systems PLC (LSE:BA.), Rolls-Royce Holdings PLC (LSE:RR.) and Babcock International PLC (LSE:BAB) all slipped, victims of a bout of profit-taking after a long run fuelled by rising Western defence budgets and a geopolitical climate that has looked increasingly like a rebooted Cold War.
Shares in these sector heavyweights fell by 2-4% in morning trading.
The trigger this time was a flicker of optimism. With the US putting forward a revised plan aimed at moving Ukraine toward a negotiated peace, traders seized the chance to lock in gains that have been building since Russia’s invasion and the subsequent flare-ups across the Middle East.
After almost four years of relentless tension, even a hint of diplomacy was enough to knock the sector.
Rolls-Royce has surged 78% so far this year, while BAE Systems is up 40%, numbers that made the stocks ripe for trimming once the headlines briefly turned less grim.
The underlying trend remains unchanged; governments are still funnelling money into their militaries, but dealers didn’t pass up the opportunity to take some profit off the table.