London, Feb 7, 2026, 08:54 GMT — The market is closed.
- BAE Systems picked up 1.2% to close at 1,879 pence on Friday, capping off a volatile week for stocks in the UK and across Europe.
- European defence stocks picked up, getting a lift as investors digested new headlines around capital returns in the sector.
- Attention turns to BAE’s full-year numbers due Feb. 18, with investors watching for fresh details on cash returns, new orders, and the 2026 outlook.
BAE Systems (BAES.L) ended Friday’s session up 1.21% at 1,879 pence. Trading during the day ranged from 1,838 pence to 1,889.62 pence before the London market headed into the weekend. The defense contractor carries a market cap around £54.8 billion, with a 52-week high marked at 2,159 pence, market data shows. 1
This shift is notable: defense stocks are showing more sensitivity to broader risk sentiment, behaving like “macro” plays once again. Not long ago, order books and contract announcements were calling the shots.
Europe’s aerospace and defence sector index climbed 1.6% on Friday, handily beating the wider market. Shares in Norway’s Kongsberg surged 15.6%, following a profit beat and news of a $165 million order for remote weapon stations. “Much of this uncertainty was spilling over to the rest of the world,” said Sophie Huynh, portfolio manager and strategist at BNP Paribas Asset Management, pointing to sharp sector swings this week. 2
Not much on the corporate news front, but GXO Logistics did put out an operational update Thursday. The company renewed—and expanded—a six-year contract with BAE Systems, tied to Type 26 frigate work in Scotland. “Extending our partnership reflects BAE Systems’ confidence,” said Gavin Williams, GXO’s managing director for UK & Ireland. Jen Blee, manufacturing and facility director for BAE naval ships, pointed to expected gains in “the efficiency of our supply chain and shipbuilding operations.” 3
Still, investors aren’t only tallying orders. They’re keeping an eye on how governments handle payouts.
U.S. investors are eyeing a fresh White House move aimed at reining in dividends and buybacks from defense contractors, according to a Reuters analysis. “Micromanaging of capital allocation is three-quarters of a step back,” said David Sowerby, managing director at Ancora Advisors. Richard Aboulafia, an aerospace and defense consultant, sees the clampdown as something that could “disproportionately hurt” older, income-oriented firms. 4
Capital returns are in focus for BAE ahead of its upcoming results. Back in November, the company projected about £1.5 billion would go back to shareholders in 2025, with around £500 million earmarked for share buybacks. Full-year numbers are due Feb. 18, 2026. At the time, chief executive Charles Woodburn pointed to a “strong order backlog” and said he was “confident in the outlook.” 5
Still, the market isn’t blind to the pitfalls. The GXO renewal lacked any detail on financials, leaving investors guessing. There’s skepticism: flashy shipbuilding announcements won’t impress unless they actually deliver cash. If procurement schedules slip—or if fresh political rules start limiting payouts—sentiment could sour quickly.
When markets open Monday, eyes will be on European defence stocks to see if last week’s rally has any legs. BAE’s shares, in particular, are on watch after trying to recover from their recent slide.
