Defence sector

Company Update:

Following President Trump's comments  on  his "disappointment" that NATO allies don't join the US in securing the Strait of Hormuz, the likelihood of a US Withdrawal from NATO appears bigger than ever. While the timing of such an exit is uncertain and could be reversed by the next President, we believe it could have a significant impact on some European stocks.

The European defense relies heavily on US materiel (aircraft and missiles), notably for its nuclear deterrence component (with the notable exception of France). 

We believe that should the US withdraw from NATO, many countries would reconsider their choice of defense materials, whether for aircraft (which would benefit groups like Dassault Aviation or Saab) and for missiles, which would be a positive ( MBDA, EADS, Leonardo, and Thales). Conversely, it could be a negative for BAE, which is widely perceived as a company with extremely strong ties to the US. 

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