Rolls-Royce leads defence stock rebound amid tariff turmoil
Following a tumultuous period triggered by Donald Trump’s sweeping tariff announcements, London’s financial markets showed signs of recovery on Tuesday.
Defence stocks, in particular, emerged as notable gainers in leading the resurgence.
Tariff-driven losses
Trump recently imposed a 10 per cent tariff on British goods entering the United States.
As part of a sweeping trade shift dubbed ‘Liberation Day’ by the Trump administration, new levies – such as a 10 per cent tariff on British goods – injected uncertainty over UK-US economic relations, provoking anxiety among British exporters.
“The FTSE 100 didn’t have a single stock in positive territory, which illustrates the severity of the situation. Big names that have been winning trades such as defence groups Rolls-Royce and Babcock were on their knees” said Russ Mould, investment director at AJ Bell, at the time.
Rolls-Royce has experienced a volatile few days’ trading. The firm’s shares had reached an all-time high of 812p in mid-March, before plummeting to 635p following the tariff announcements.
Shares in the FTSE giant sank as much as 10 per cent on Friday after fears of a global trade war exploded.
Elsewhere, Babcock International plunged by nearly eight per cent, closely followed by Chemring Group, which fell by 7.16 per cent.
Kevan Craven, chief executive of ADS Group, an industry body representing UK aerospace, defence, security and space companies, expressed concern over the tariffs’ impac but remained remained optimistic: “While the tariff announcement is disappointing, it will not kill our sectors.”
“However, our members forecast additional costs in the tens of millions of pounds, particularly in the aluminium and steel markets”, he said.
Derren Nathan, head of equity and research at Hargreaves Lansdown, said that markets had been “unprepared for the depth and breadth of tariffs announced by the White House.”
A defence stock comeback
After days of subsequent significant losses, the FTSE 100 index closed up 2.7 per cent on Tuesday, reflecting a broader stabilisation in global markets.
The aerospace and defence sector outperformed, with Babcock International, Rolls-Royce and BAE Systems recording substantial gains.
Rolls Royce led the charge rising eight per cent, followed closely by BAE Systems and Babcock, which posted gains of 6.64 per cent and 7.01 per cent respectively.
Market analysts view the recent uptick in defence stocks as a reflection of shifting investor sentiment.
Mould said: “After multiple punishing sessions, stock markets appear to have started their road to recovery”.
The UK’s aerospace and defence index rose more than five per cent underscoring the sector’s robustness.
As tariff discussions continue, market participants will closely monitor policy shifts and their impacts on various sectors.