- FTSE 100 up 0.7%
March 3 (Reuters) - A sharp rally in defence shares lifted Britain's FTSE 100 to record highs on Monday, as investors cheered the possibility of a military spending surge in Europe.
European leaders agreed on Sunday they needed to spend more on defence, as France and Britain prepared to present a partial one-month truce between Russia and Ukraine.
The agreement to increase defence spending is an effort to show U.S. President Donald Trump that the continent can defend itself, after Ukraine's Volodymyr Zelenskiy clashed with the U.S. leader and cut short a visit to Washington.
Britain's blue-chip index was up 0.7% by 1150 GMT, trading at a record high. The FTSE350 aerospace & defense index soared 8.2% to a fresh record high.
In the UK, BAE Systems led the gains with a nearly 14% jump, while Rolls-Royce Holdings jumped 5.4%, tracking similar moves in defence shares across Europe .
The gains were also supported by a Reuters report that said the parties in talks to form Germany's new government are considering setting up a special fund for defence.
The UK's defence sector has soared over 36% so far this year.
However, continued uncertainty over the path of the country's economic growth, as well as the looming threat of U.S. tariffs, could challenge the index's solid run.
The S&P Global Purchasing Managers' Index for UK manufacturing showed British factories cut staff at the fastest pace in nearly five years last month. However, manufacturers also turned the most positive in six months, hoping for a pick-up in the economy.
The FTSE 250 midcap index was little changed.
Shares of engineering firm Senior Plc rose 3.2% after the company said it was in advanced negotiations with a small number of parties for the sale of its aerostructures business.
Bunzl was the biggest individual FTSE 100 decliner, falling 7.8% to its lowest since August, after it reported a fall in annual profit.
Reporting by Lisa Mattackal in Bengaluru; Editing by Shinjini Ganguli
Source: Reuters