BAE at all-time high after Trump defence splurge

The UK’s largest defence company hit an all-time high yesterday after Donald Trump pledged to increase US army spending by around £42bn next year.

BAE Systems added £270.3m to its value after the US President’s budget suggested increasing total defence costs to £465.6bn, which is around 10pc higher than current budget caps.

With 37pc of BAE’s sales exposed to US defence, analysts at UBS said the firm is well placed to benefit from the proposals.

BAE’s valuation is attractive relative to US and european peers, the broker said, although it named UK aerospace firm Cobham as another beneficiary.

The company was also boosted by the news that Indian Prime Minister Narendra Modi has approved a long-awaited policy to increase defence manufacturing – BAE has been increasingly looking to India as a source of future growth. In January the firm received a £418.4m contract from the US Department of Defence to provide the country with two missile launchers. Shares rose by 1.3pc, or 8.5p, to reach 650p.

The FTSE 100 rose 0.4pc, or 29.61 points, to 7514.90, despite mining stocks taking a hit after the ratings agency Moody’s downgraded China over its ability to meet financial commitments such as debt payments.

With China one of the world’s largest metals consumers, the basic materials sub-sector of the FTSE spent much of the day in the red. In particular, Randgold

Resources fell 1.5pc, or 105p, to 7135p, while Centamin sank 1.8pc, or 3.1p, to 165.7p.

Budget airline EasyJet was one of the index’s biggest winner yesterday, despite many expecting the stock to suffer this week in the fallout from Monday’s terrorist incident in Manchester.

Analysts at Liberum raised easyJet’s target price to 1000p from 825p, although they maintained a ‘sell’ rating on the stock.

easyJet rose 3.3pc, or 43p, to 1344p yesterday, and is now up 5.9pc for the week. In the mid- cap index, IT firm

Softcat was among the biggest losers as it raised eyebrows with the announcement that chief executive Martin hellawell will now become the company’s chairman. The move opposes recommendations in the corporate governance code, which states the two roles are too closely connected.

Investment company Schroders faced similar criticism last year when shareholders staged a rebellion over chief executive Michael Dobson’s move to chairman.

But Softcat said it made the choice as a result of hellawell’s ‘extensive and unparalleled’ experience, adding that it was in the interest of shareholders to continue to benefit from this.

Regardless, investors ran for the door, with shares down 8.4pc, or 38.6p, to 419p.

The soft drinks firm Britvic advanced after proving its worth in the face of strong newcomer Fever-Tree Drinks with a stellar set of results.

The company, which was overtaken by Fever-Tree as the largest soft drinks firm in the UK last month, said revenues increased by 11.5pc year-on-year in the six months to April 16.

But Britvic, which sells drinks such as Robinsons, J2O and Pepsi in the UK, saw profits fall 4.9pc to £38.6m over the period.

Regardless, shares rose 2.5pc, or 17.5p, to 720.5p.