Defense Primes — Europe & Asia

Kawasaki Heavy Industries announced on the 6th that its defense business sales revenue for fiscal 2030 is expected to rise to between 700 billion and 800 billion yen. Its previous plan called for 500 billion to 700 billion yen, and the company says the government's increased defense spending will provide a tailwind. The company held a briefing that day on the progress of its management plan, which ends in fiscal 2030, and said that due to reforms to the contract system with the Ministry of Defense, the defense business's operating profit margin is expected to exceed 10 percent from fiscal 2027 onward. It also said that, in response to changes in the nature of warfare such as the spread of unmanned equipment and artificial intelligence, it aims to lift defense business sales revenue above 1 trillion yen by the mid-2030s.

Mitsubishi Heavy Industries announced on the 2nd that it has acquired an artificial island developed by Shimonoseki City, Yamaguchi Prefecture, as industrial promotion land. Amid rising global demand for ships and backing from the Japanese government from an economic security standpoint, its subsidiary Mitsubishi Shipbuilding will invest about 100 billion yen to expand shipbuilding capacity. It will transfer part of the functions of the Shimonoseki Shipyard's Enoura Plant and build a new hull block manufacturing plant to strengthen its production system. Of the investment, it will receive up to 40 billion yen in subsidies from the government. In September, the plan was certified by the Ministry of Land, Infrastructure, Transport and Tourism as a supply assurance plan for specified critical materials, namely ship components, under the Economic Security Promotion Act.

BofA Securities upgraded Dassault Aviation to buy from neutral and raised its price target to €360 from €345, citing the French fighter maker's long order book and potential new Rafale contracts. The target implies about 27% upside from the €284 share price cited in the report, and BofA noted the stock has fallen about 20% from its year-to-date high, creating a more attractive entry point. Dassault's Rafale backlog provides about 7.5 years of production visibility at current delivery rates, with further upside possible from India and Ukraine. India's proposed order for 114 Rafales could become a key catalyst in the fourth quarter and would be the largest export order in the aircraft's history, while Ukraine has expressed interest in acquiring up to 100 Rafales, initially ordering 16 aircraft under a July 2026 agreement with France with deliveries due to begin in 2028-29. Neither opportunity has yet become a firm contract, but BofA said that if both orders are secured, Dassault's backlog could exceed 400 aircraft, potentially extending production visibility to about 15 years at 2026 production rates. BofA also raised its 2026 earnings-per-share forecast to €16.40 from €16.30 and its 2028 forecast to €22.31 from €21.42, while cutting its 2027 estimate to €19.36 from €19.67.

Chancellor John Healey has set out plans to reindustrialise Britain, announcing a £100 million fund for local mayors to boost apprenticeships, a £300 million investment by Rolls-Royce in British factories, and confirmed support for British shipbuilding. In his speech to the Labour Party conference in Liverpool, Healey said the new Local Apprenticeship Service would see teams acting like football scouts to link young people with firms, describing it as a down payment on work to tackle the almost one million young people not in employment, education or training. He also confirmed previously trailed plans for £6 billion of government contracts for British shipyards, and said Rolls-Royce would invest £300 million in factories in Derby, Bristol, Glasgow and Rotherham. Healey, who will deliver his first Budget next month, acknowledged he did not have the money available to his predecessor Gordon Brown and sought to reassure markets that fiscal discipline would be at the core of his Budget. The speech came as diesel hit a record 199.18p a litre and the Confederation of British Industry said firms across the private sector expect activity to fall in the three months to December, though CBI chief executive Rain Newton-Smith said Healey had set out a strong vision with many of the right signals.

Curtiss-Wright raised its 2026 Naval Defense sales growth outlook to 7-9% and its 2026 Aerospace Defense sales growth outlook to 12-14%, while maintaining its Commercial Aerospace outlook at 10-12%, as strong demand across naval defense, aerospace and defense electronics continued to drive results. In the second quarter of 2026, Naval & Power sales increased 7% year over year on higher naval defense revenues from submarine program activity and increased aftermarket demand, and the company expects Naval & Power sales to grow 10-11%. Aerospace & Industrial sales rose 12% year over year in the second quarter, supported by higher demand for actuation equipment and stronger commercial aerospace activity across narrowbody and widebody aircraft. Defense Electronics orders rose 8% year over year in the second quarter to $1.1 billion, supported by embedded computing, tactical communications, turret stabilization and radar systems, while companywide book-to-bill was 1.16 and backlog reached $4.5 billion, up 10% from December 2025. The strong order pipeline provides revenue visibility as Curtiss-Wright converts backlog into sales, and its exposure to submarines, fighter jets, UAVs and commercial aircraft, along with sustained defense and aerospace demand, could support growth beyond 2026.

Yemen's Houthi group said on the evening of Thursday, September 24, that it had fired missiles and sent drones to attack highly sensitive targets in Riyadh, the capital of Saudi Arabia, as well as facilities belonging to Aramco in Yanbu, a Red Sea port city. It marks a new round of long-range attacks amid an increasingly intense conflict with Saudi Arabia. Meanwhile, French President Emmanuel Macron said France is preparing to send military equipment to help protect Yanbu, a key industrial and energy hub on Saudi Arabia's Red Sea coast. In other conflicts, Iranian President Masoud Pezeshkian said ending the war that has dragged on for seven months depends on a decision by the United States, while China is pushing all parties to reduce tensions. At the 81st regular session of the United Nations General Assembly, Xinhua News Agency reported that representatives of several countries walked out of the chamber in protest while Israeli Prime Minister Benjamin Netanyahu delivered his remarks during the general debate. Chinese President Xi Jinping said at the White House on Thursday, September 24, that both China and the United States have the capacity and the responsibility to develop and manage artificial intelligence technology for the benefit of humanity, and must ensure that such technology always remains under human control. Meanwhile, U.S. airlines came out against the idea of adding passenger flights between the United States and China after President Xi Jinping proposed that the two countries increase direct flights. U.S. airlines argued that adding flights would further favor Chinese carriers, since they can still use flight routes through Russian airspace. In financial markets, the yield on 10-year Japanese government bonds jumped to 3.115% today, the highest level since August 1996. And Denmark's defense intelligence service warned that Russia may carry out limited military attacks on NATO member states in the coming months, assessing that the risk has increased although it remains at a low level.

Denmark's Defence Intelligence Service, DDIS, has warned that Russia may carry out limited military attacks on member states of the North Atlantic Treaty Organization, NATO, in the coming months, assessing that the risk has increased although it remains at a low level. In a report on Thursday, September 24, DDIS said Russia could use long-range weapons to strike critical infrastructure used to support Ukraine, in order to draw Europe's resources away from aid to Ukraine and to sow division within NATO if member states cannot agree on how to respond jointly. However, DDIS said it has not seen signs that Russia is preparing a full-scale invasion of a NATO member state, although that possibility cannot be entirely ruled out, and it also warned that Russia may step up hybrid warfare against Western countries and NATO, including large-scale cyberattacks that disrupt critical societal functions and sabotage that could cause loss of life. The warning comes as several European security officials and politicians have raised alarms about the threat from Russia. Poland said on Thursday that a fire at a Starlink ground station in the country was sabotage aimed at disrupting internet services, including use by the Ukrainian military. Polish Deputy Prime Minister Krzysztof Gawkowski said it is not yet possible to determine who carried out the attack, but there are several indications that the incident fits Russia's new pattern of attacks, according to Reuters.

The TISCO Economic and Strategic Analysis Center, or TISCO ESU, assesses that global financial markets are entering a phase of capital competition, as governments around the world need to borrow heavily to expand defense budgets while private-sector big tech and hyperscaler firms seek to raise enormous sums to accelerate the buildout of data center infrastructure, chip fabrication plants, AI facilities, and power plants. This is pushing interest rates and government bond yields up by roughly 0.60 to 0.90 percent. Komson Prapakpol, head of the TISCO Economic and Strategic Analysis Center, said the United States plans to expand its defense budget from 1 trillion dollars to 1.5 trillion dollars, an increase of 50 percent, while Japan aims to raise defense spending from below 2 percent to 3.5 percent of GDP, the highest level since the period from 1970 to 1980. Germany and France are also accelerating increases in their security budgets. Thanaphat Thanachat, an analyst at TISCO ESU, said the United States has public debt exceeding 100 percent of GDP, or more than 40 trillion dollars, and a fiscal deficit as high as 6 percent of GDP per year, driving its interest burden to double that of four to five years ago. France's public debt has risen by nearly 20 percent of GDP between 2019 and 2025, with an annual deficit of 5 percent of GDP. As for the interest rate path of the three major central banks, TISCO ESU expects the Federal Reserve to raise rates one more time, by about 0.25 percent, at its December meeting, ending at 4.25 percent, and to hold at that level through 2027 before cutting in 2028. The European Central Bank is expected to raise rates one more time, by about 0.25 percent, in December, while the Bank of Japan is expected to gradually keep raising rates until they reach 1.75 percent in mid-2027. The yield on 10-year U.S. government bonds is expected in the base case to hold steady at 5 percent through the end of 2026, but if the Federal Reserve fails to control inflation, the worst case could see the bond yield rise to 6 percent.

Iranian President Masoud Pezeshkian said that ending the war, now in its seventh month, depends on a decision by the United States. Speaking in an interview with Fox News broadcast on Thursday, September 24, he said America must choose whether to end this, after being asked whether the war could end by the end of this year. Fighting continues, with Houthi forces launching a barrage of missiles and drones at targets in Saudi Arabia on the morning of September 25. Saudi authorities said they intercepted six missiles and issued alerts in Mecca, Jeddah and Yanbu. Saudi Arabia, Turkey and Pakistan are preparing an emergency meeting of military commanders to discuss ways to assist Saudi Arabia under the joint Mecca defense agreement, and Saudi Arabia's Grand Mufti called on forces to be ready to fight the Houthis until the group is removed from power. Pezeshkian said the Houthis must take responsibility for their own actions and that Iran is not in a state of war with Saudi Arabia. The Iran issue was also raised at the US-China summit in Washington, where Chinese President Xi Jinping, during a three-day visit to the United States, discussed a range of issues with President Donald Trump, including trade, artificial intelligence, Taiwan and Iran. Zhai Jun, China's special envoy for the Middle East, said the situation in the Middle East was one of the key issues discussed by the US and Chinese leaders, and said the shared views of both sides are important for defusing the conflict. Trump wants China to help pressure Iran to find a way to end the war, after the United States and Iran returned to indirect talks on the sidelines of the United Nations General Assembly in New York. Iranian officials have signaled that the Strait of Hormuz could reopen within seven days if the United States begins to ease its maritime blockade of Iranian ports.

French President Emmanuel Macron has revealed that France is preparing to send military equipment to help defend Yanbu, a key industrial and energy hub on Saudi Arabia's Red Sea coast. In an interview with French television station TF1 on Thursday, September 24, he said France had reached a final agreement in talks with Saudi Arabia on sending military equipment to protect the area, including troops, radar and air defense systems. Asked about the possibility of sending Rafale fighter jets, Macron said France would consider it based on changes in the situation and necessity, noting, "We already have some fighter jets stationed in this region." The French leader said the most important thing for him was "bringing energy prices down," and also mentioned the need to release oil from reserves and restore smooth transport routes in the Middle East. Xinhua News Agency reported that Macron's remarks came after Yemen's Houthi group said on Saturday, September 19, that it had launched a large-scale attack in Saudi Arabia, targeting the Saudi capital Riyadh and the city of Yanbu, marking a major escalation of the conflict between the two sides. Earlier on Thursday, the Saudi-led coalition said its air defense systems had intercepted six Houthi ballistic missiles aimed at the Saudi cities of Taif and Yanbu, while Saudi Arabia continued its air strikes against Houthi-held areas across Yemen.

The Bank of Nova Scotia has priced C$750M, or US$534.4M, in Canadian defence notes, marking the first defense-labeled bond issuance by any entity in the Canadian market. According to a company statement released Tuesday, the five-year non-call four-year notes will raise proceeds that the bank intends to allocate an amount equal to the net proceeds to finance or refinance eligible assets supporting Canada's defense, security, and economic resilience priorities. The framework outlines eligible activities and reporting duties for defence instruments based on Canadian defence priorities, including the Defence Industrial Strategy, and was independently assessed by Sustainable Fitch as aligned with current defence financing practices. Paul Scurfield, Executive Vice President and Global Head of Capital Markets at Scotiabank, said the bank is proud to launch the first transaction under Scotiabank's Defence Issuance Framework, giving investors an opportunity to participate in a labeled bond supporting Canada's defense capabilities, industrial base, and long-term economic resilience.

South Korean President Lee Jae-myung and US President Donald Trump agreed that discussions on a strategic investment project between the two countries have made significant progress, after the two met for 30 minutes on the sidelines of the United Nations General Assembly yesterday. Wi Sung-lac, South Korea's national security adviser, said the two leaders also agreed to strengthen cooperation and continue discussions on various issues under the joint statement issued after their summit last November, including nuclear fuel reprocessing, nuclear-powered submarines, shipbuilding, and the transfer of wartime operational control of military forces from the United States to South Korea. Trump also reaffirmed his readiness to open negotiations with North Korea again, and the two leaders agreed to maintain close contact to advance the peace process. The meeting came after South Korea's Ministry of Industry reported to legislators yesterday on implementation plans under the two countries' 350 billion dollar investment package, which includes a gas-fired power plant in Texas identified as possibly the first investment project under the package, as well as the possibility of investment in nuclear energy and a liquefied natural gas project in Alaska. Wi said President Lee also views the US-China summit scheduled for Thursday as important for developments in the region, including South Korea-China relations, and expressed hope that the meeting will be successful.

Japanese Prime Minister Sanae Takaichi met with US President Donald Trump on Tuesday, September 22, in New York to demonstrate the strength of the bilateral relationship, ahead of Chinese leader Xi Jinping's arrival in Washington for his first state visit in 11 years. The talks lasted about 35 minutes and were held on the sidelines of the United Nations General Assembly, or UNGA. The Japanese government said the two agreed to coordinate closely on issues related to China, including economic security, and agreed to strengthen the deterrence and response capabilities of the Japan-US alliance. Takaichi said the security environment in Asia is growing more tense and that she wanted to show the world how strong our alliance is, thanking Trump for his leadership in steadily advancing cooperation on economic security in areas such as artificial intelligence, semiconductors and critical minerals. Trump praised Takaichi, saying she has done an excellent job, is his friend and will be an excellent prime minister. The talks were aimed at coordinating policy on China ahead of the Trump-Xi summit at the White House on Thursday, September 24. Diplomatic relations between Japan and China remain stalled since Takaichi signaled in November that a Taiwan attack could be considered a situation threatening Japan's survival.

President Donald Trump is scheduled to meet Danish Prime Minister Mette Frederiksen and Greenlandic Prime Minister Jens-Frederik Nielsen today, September 22, to sign a trilateral security agreement that would open the way for the United States to expand its military presence on Greenland. The signing ceremony is set for 10:30 a.m. US Eastern Time, or 9:30 p.m. Thailand time, in New York City during the United Nations General Assembly. Three sources said the agreement would allow the United States to expand its military presence in Greenland beyond the currently operating Pituffik Space Base, with two additional military sites expected to be opened: Narsarsuaq, a former US air base from the Cold War era that is now home to only a few dozen people, and Mestersvig, an operating base for the Sirius Dog Sled Patrol, Denmark's special operations unit. Danish Foreign Minister Lars Løkke Rasmussen said the agreement would place Arctic security matters under the joint purview of the North Atlantic Treaty Organization, rather than leaving them as a burden for the United States and Denmark alone. The contents of the agreement have not been disclosed ahead of the signing ceremony, and it remains unclear whether it will amend the 1951 defense treaty that serves as the legal framework for the US military presence in Greenland, or establish a new cooperation framework.