US defence stocks surged on Gates' budget proposal

Major US defence stocks were raised out of the doldrums by Defense Secretary Robert Gates' budget proposals thanks to the lifting of a degree of uncertainty and proposals that were not as dramatic as the markets expected.

Fitch Ratings was among those who noted that although four of the top 10 US programmes face reductions or delays, several of the leading projects - including the F-35 and F/A-18 aircraft programmes - were to be increased.

The proposal to increase intelligence and reconnaissance support by USD2 billion highlighted the new priorities of the Pentagon and threw up clear winners ranging from sensor and systems providers such as Raytheon (which closed 8.2 per cent up). Textron - which successfully divested its HR Textron unit the day before and increased its exposure to unmanned air systems through the buy of AAI Corporation - was the leader of the day, with a double-digit jump of 11.3 per cent.