JPMorgan upgrades BAE Systems on Ukraine crisis

JPM said the invasion of Ukraine may have two consequences for defence stocks.

"First, the US and Europe may decide they need to spend more on defence. Second, investors may reassess the role that defence plays in protecting peace and democracy, leading to multiple expansion and a re-assessment of the ‘ESG discount’ that has weighed on defence stocks in recent times," it said.

The bank said that prior to Russia’s recent actions, it believed that European defence spending would grow at a low-to-mid single digit level and the US defence budget would grow in line with a "normal" level of inflation.

"It is too early to know whether Russia’s invasion of Ukraine will escalate into a longer and bigger conflict," JPM said. "However, we believe Western governments will now give far more thought to the need for “defence” and the risk to defence budgets is now skewed to the upside."

At 1100 GMT, the shares were up 4.6% at 660.80p.