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As war clouds gather over Ukraine, American defence stocks rise even as markets go down

Aerospace giant Northrop Grumman’s stocks saw sharp 4.53% rise, among several defence companies defying market trend as US and other NATO countries warned citizens to leave Ukraine.

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New Delhi: As fears of an imminent war loomed over the Ukraine crisis between Russia and the US, American stock prices went for a fall but those of defence companies showed an uptick.

The big reason for the fall in the American stock exchange seems to have been the United States’ Friday warning to American citizens to depart Ukraine as Russia could invade the country “at any time”.

US National Security Adviser Jake Sullivan had said, “We obviously cannot predict the future, we don’t know exactly what is going to happen, but the risk is now high enough and the threat is now immediate enough that [leaving] is prudent”.

Several of the US’ allies within NATO, such as the UK, Belgium and the Netherlands, also issued similar warnings to their citizens based in Ukraine.

The Dow Jones Industrial Average reflected a 1.43 per cent drop, the S&P 500 fell by 1.90 per cent, and NASDAQ by 2.78 per cent. The Russell Index fell by 1.02 per cent. On the other hand, the VIX Index, which tracks the volatility expectations of the stock market on the basis of S&P 500 options, showed a sharp 14.43 per cent rise.

However, bucking this American market-wide trend Friday were prominent defence contractors, who might stand to benefit from any war between Russia and Ukraine.

 

For instance, fighter jet manufacturer Lockheed Martin’s stock price rose by 2.79 per cent to $396.19. Established in 1995 as the result of a merger, the defence contractor is best known for its aerospace innovations.

Similarly, aerospace specialist rival Northrop Grumman experienced a steep 4.53 per cent gain to $399.32, while shipbuilding giant Huntington Ingalls saw its stock price increase by 2.34 per cent to $183.87, and surveillance specialists L3Harris rose by 3.60 per cent to $222.97.

Smaller but still significant counters to the overall market trend Friday included Raytheon’s 0.22 per cent rise, General Dynamics’ 1.04 per cent gain and Leidos’ 1.39 per cent increase.

However, other prominent defence firms — Boeing and Booz Allen Hamilton — saw their stocks fall by 2.99 per cent and 0.45 per cent respectively.

According to the Financial Times, oil prices also surged Friday, with the Brent Crude oil benchmark now at $94.96 per barrel.

“The uncertainty caused by this Russia-Ukraine escalation will likely keep market volatility elevated in the near-term . . . we would expect tensions to ease over time, but . . . [we] may see continued pressure on energy and oil prices, as well as a flight to safe-haven assets, including the US dollar and Treasuries,” the Financial Times report quoted Mona Mahajan, senior investment strategist at US-based financial services firm Edward Jones, as saying.

(Edited by Rohan Manoj)


Also read: Russia & US to participate in India’s largest maritime exercise ‘Milan’, amid Ukraine tensions


 

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