European defence stocks rally as Russian drones shot down in Poland

European defence companies such as Rheinmetall, BAE Systems and Thales gained as Russia’s war in Ukraine spilled over into Poland when drones were shot down in the neighbouring territory, triggering a sharp rebuke from leaders across the continent.

Meanwhile, soft US producer inflation data firmed up expectations the Federal Reserve will cut its key rate when policymakers meet next week, spurring on the Nasdaq Composite and S&P 500 to fresh records.

Larry Ellison scaled the peaks to become the world’s richest person after Oracle soared 35% in late trading after forecasting a surge in artificial intelligence-backed revenue and striking a US$300 billion deal with OpenAI.

And Swedish buy now, pay later firm Klarna made a pretty debut on the New York Stock Exchange with an 18% stag.

Getting noisy on the Western front

European defence companies were broadly stronger in a soft day for markets across the continent as Russia’s invasion of Ukraine spilled over into the neighbouring nation, with Germany’s Rheinmetall advancing 3.3%, the UK’s BAE Systems rising 2.2% and France’s Thales gaining 3%. The UK’s FTSE 100 slipped 0.2% and Germany’s DAX 30 slid 0.4%, while France’s CAC 40 gained 0.2%.

Nato jets scrambled to shoot down Russian drones that crossed the border during a widespread attack in western Ukraine and Polish prime minister Donald Tusk said his nation is closer to military conflict than at any time since the second world war.

The kiwi dollar traded at 50.80 euro cents at 7am in Auckland from 50.77 cents yesterday, while gold futures edged up 0.1% to US$3,685 an ounce

“Rising geopolitical tensions, after Poland shot down Russian drones which had crossed into its territory, had limited impact on sentiment,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note.

Across the Atlantic, Wall Street eased from record highs, with the S&P 500 up 0.3% in late trading and the tech-heavy Nasdaq marginally higher, while the Dow Jones Industrial Average dipped 0.4%, with Salesforce, Amazon and Apple leading the blue-chip index lower.

Those heights were underpinned by increased bets the Federal Reserve will cut the federal funds rate when policymakers meet next week after the producer prices index unexpectedly fell in August.

Stay on termination

That decision will include governor Lisa Cook, who won a temporary stay on her sacking by US President Donald Trump, although the White House will appeal the court ruling.

The European Central Bank is expected to keep its key rate at 2% when it reviews policy on Thursday.

Nvidia gained 3.3%, joining AI-linked companies higher after Oracle soared 35% after winning several multi-billion dollar deals and signalling an AI-fuelled boom is in the pipeline for its cloud-computing arm.

Oracle’s wins included a five-year, US$300 billion deal with OpenAI, and the surging share price propelled Larry Ellison’s personal wealth above Elon Musk’s to take the mantle of the world’s richest person.

And Sweden’s Klarna jumped as much as 30% in its debut on the New York Stock Exchange, with the shares recently up 18%, extending the run of strong initial public offerings on Wall Street.

The subdued tone is set to carry over to the antipodes, with Australian futures pointing to a 0.2% decline for the S&P/ASX 200 index when trading opens across the Tasman, while the kiwi dollar was unchanged at 59.47 US cents from late yesterday.

New Zealand’s S&P/NZX 50 index will continue to see firms shedding rights to their upcoming dividend payments, with Freightways and Air New Zealand among those going ex-dividend today. Outside the benchmark index, NZ Rural Land Co and NZME are also shedding dividend rights.

There’s no major local data scheduled for today, while Reserve Bank governor Christian Hawkesby is due to speak at the Financial Services Council’s annual conference in Auckland today, preceding a panel discussion on combatting scams.

Reporting by Paul McBeth. Image from Jana Shnipelson on Unsplash.