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(Bloomberg) -- BAE Systems Plc shares declined the most in two months as Bank of America Corp. analysts downgraded the British defense-equipment manufacturer due to the risk of potential US government spending cuts overseen by Elon Musk.

The stock fell as much as 4.5% as a BofA team led by Benjamin Heelan cut their rating to underperform from neutral. The sell-equivalent recommendation is a contrarian call as only two other firms have negative recommendations among 224 tracked by Bloomberg.

“We see growing uncertainty around the impact of the Department of Government Efficiency on the US budget,” BofA wrote.

The US is BAE’s biggest market, accounting for £10.7 billion ($13.6 billion) in sales during fiscal 2023 or about 46% of group revenue.

However, “DOGE could result in contract changes,” said BofA.

President-elect Donald Trump has said Musk will run DOGE, named in homage to the Tesla Inc. billionaire’s favorite cryptocurrency. Musk has targeted $2 trillion in spending cuts.

BAE and other European defense stocks have rallied since early 2022 following the outbreak of conflicts in Ukraine and the Middle East. The UK-listed company is priced at 16 times earnings expected in a year’s time, a premium of 33% over its long-term average.

BofA also downgraded smaller UK defense company QinetiQ Group Plc to underperform due to its US exposure. The shares slumped as much as 5.1%.

(Bloomberg) -- BAE Systems Plc shares declined the most in two months as Bank of America Corp. analysts downgraded the British defense-equipment manufacturer due to the risk of potential US government spending cuts overseen by Elon Musk.

The stock fell as much as 4.5% as a BofA team led by Benjamin Heelan cut their rating to underperform from neutral. The sell-equivalent recommendation is a contrarian call as only two other firms have negative recommendations among 224 tracked by Bloomberg.

“We see growing uncertainty around the impact of the Department of Government Efficiency on the US budget,” BofA wrote.

The US is BAE’s biggest market, accounting for £10.7 billion ($13.6 billion) in sales during fiscal 2023 or about 46% of group revenue.

However, “DOGE could result in contract changes,” said BofA.

President-elect Donald Trump has said Musk will run DOGE, named in homage to the Tesla Inc. billionaire’s favorite cryptocurrency. Musk has targeted $2 trillion in spending cuts.

BAE and other European defense stocks have rallied since early 2022 following the outbreak of conflicts in Ukraine and the Middle East. The UK-listed company is priced at 16 times earnings expected in a year’s time, a premium of 33% over its long-term average.

BofA also downgraded smaller UK defense company QinetiQ Group Plc to underperform due to its US exposure. The shares slumped as much as 5.1%.

Something odd, QinetiQ and BAE battered this morning...I have no idea

Entering the top-up zone...

My sentiments too! Were I calling the shots, I'd be focussing on building on the Aviva brand, rather than paying over the odds for entities which essentially cover the market to which we're already exposed with considerable prestige. Is it just me, or do too many CEOs just try to 'look busy' for the sake of looking busy?

Ijgs - Why do you need to ask? Presumably you already know the answer? Perhaps a better question is why would anyone who has done their research and concluded that markets other than London suit their specific requirements better, continue to be investing elsewhere - and then b*tch about it? Seems foolish to me..

NumptyClub - I tend to agree, 'Rachel from accounts' has sown the seeds of doom across myriad sectors of the economy, right from the get-go and then confirmed it in spades with the budget. Clearly the plan was to get an early regressive budget implemented as soon in their term as possible, in the lame hope that towards the next election we'll all be sipping Champagne and eager to bring these utter clowns back to Westminster. Another example of the danger a large majority brings to the power-hungry. It will take a while to work through these shocks and dismay, but an optimistic approach is to identify buying opportunities among those companies sufficiently well run and placed to steer through the next couple of years. I'm reasonably happy to top-up across the successful slow-burners.

London was the only market in Europe to finish in the blue today - and the Dow S&P and Nasdaq all finished lower. Just sayin'...

585 for me..

Why the drop, just after 2pm?

Let's all hope the 'Ultrafan' development is progressing well and will enter the market de-bugged..

Sully - "I guess you are on about the dead people, I'm agnostic but I guess you and the people who liked your post are staunch Atheists, you better be right".

For the life of me, I don't understand your reference to religiosity? Would you clarify please?

MaryB-"Grezz - isn't Reeves wonderful? Isn't Liebour wonderful? Kier for King.

NICer rise and screw the farmers. What could go wrong?

We need the Lettuce back :)"

Well, I think we all knew it was a foregone conclusion that Labour would win the election, but the scale was quite a shock. It's clear that many adopted the 'bi-election' strategy and set out to teach the Conservatives a lesson, without considering the consequences. Of all the potential candidates for the front bench positions, from several pieces that I read, I actually expected Rachel Reeves to be measured and reasonable. With her 'background' in economics, I expected the economy to be quite well managed. However, as we now know, she lied. She lied on her CV with regard to her experience and she lied about her philosophy with respect to fiscal good-governance. In practice, she's adopted policies akin to 'O' level socialist economics, which has been consistently proven to be damaging for growth and prosperity. Then with Rayner as Deputy PM and Lammy as Foreign Secretary, we have evidence that Starmer is absolutely the idealistic, power-hungry snake that most of us always suspected. I find it difficult to even watch the a-hole speak on TV...

However, as things stand, with so many sectors of society affected by both their financial raids and their general ineptitude (think immigration and crime), it seems very likely indeed we are dealing with a one-term government. I'm taking, the perhaps overly optimistic view, that in about four and a half years, we'll vote in a centre-right government, who will adopt some policies which will grow the economy and and correct the wrongs inflicted on the British mainstream and the pandering to the woke and the Islington idealists will be consigned back to the closet. Fingers crossed..

I think it must be remembered that MaryB is not a Fund Manager with the FCA on her back - just a retail investor with a method that suits her personal circumstances and cash flow.

MaryB for Chancellor!!! ;)

Parsnip "Pathetic, Putin negotiating an end to the war entirely on his terms. I personally think NATO should move in and blow the fck out of Moscow".

FWIW, my take on NATO's stance so far is to allow Russia to haemorrhage for as long as possible. It's far easier to apply the 'coup de grace' to a cripple than a fit man in fighting spirit. Aside from the immediate military advantage for NATO, a crippled economy with a more than decimated labour force will be in no position to re-arm and set its sights on renewing the war after any form of ceasefire. Any prospective investment from the West to rebuild Ukraine will need to be confident that Russia is no longer in a position to cause trouble. This strategy is of course hard on Ukraine, but in all other respects it seems to make sense.

Meanwhile, I'm glad Storm Shadows have been launched in to Russia today. I The BAE alliance is in final testing of a significantly improved variant. Out with the old and in with the new...

Cev - "Sullysworld, learn to spell the participle of the verb to lose, as in losing!!!"

I thought he meant Putler's troops were like Badland, constantly suffering from loose bowels..

Below 160?? Can any chart fanciers suggest a bottom?

Anyone got an itchy finger at these levels?

Bad - It's merely a statement of fact and undeniable record.