British defence stocks SOAR as Donald Trump plans $54billion increase in US military spend

UK defence company, Meggit, Rolls-Royce, BAE Systems, and Babcock were all in positive territory following news.

Babcock was up 35.0 points (up 3.96%) while BAE Systems was also up 13.5 points (2.18%)

French defence and civil contractor Thales has seen shares jump higher after posting a 2016 net profit of 946 million euros.

Trump is seeking what he calls a "historic" increase in defense spending, but runs into immediate opposition from Republicans in Congress who must approve his plan and say it is not enough to meet the military's needs.

More than 120 retired U.S. generals and admirals are urging Congress to fully fund U.S. diplomacy and foreign aid, areas expected to be targeted for cuts in Trump's first budget proposal.

The Republican chairman of the House Armed Services Committee says Trump's reported $603 billiondefense budget request is low, a sign of the fight ahead between Republicans and Democrats, who oppose slashing non-military spending to boost Pentagon funding.

Trump will ask the U.S. Congress to boost Pentagon spending in the next fiscal year by $54 billion in his first budget proposal, a White House budget official said on Monday.

"The talk regarding military and infrastructure spending raised expectations towards Trump's speech to the Congress later today, lifting the dollar and Treasury yields," said Shin Kadota, senior forex strategist at Barclays.

The lift for the dollar, however, was limited as the military spending increase would be accompanied by a cut in the same amount from non-defense spending, including a large reduction in foreign aid.

Moreover, investors also took a wait-and-see approach ahead of Trump's closely-watched Congressional address later in the day, capping the dollar and crimping overall market activity.

The dollar rallied hard soon after Trump won the U.S. elections in November, boosted by hopes that he would introduce large fiscal stimulus and reflationary plans. But the currency has sagged lately with the Trump administration yet to hammer out clear specifics.

"It remains to be seen how much the dollar can gain from Trump's speech, as specifics regarding tax reforms, which is of key interest to the market, may not be available until March," Kadota at Barclays said.