(Reuters) -European defence stocks fell sharply on Friday as news of a planned summit on the war in Ukraine jolted the sector after its strong run this year.
U.S. President Donald Trump and his Russian counterpart Vladimir Putin spoke on Thursday, in a two hour conversation Trump called productive. They agreed another summit on the war in Ukraine, and the two might meet within the next two weeks in Budapest.
An index of aerospace and defence companies was down around 3.4% at 0852 GMT, hitting its lowest in more than a month and on track for its biggest daily decline since early July.
The defence index has risen more than 200% since Russia launched its war against Ukraine in February 2022.
“Once again, hopes of an imminent end to the Ukraine war through diplomacy are growing in the run-up to the planned meeting between Trump and Putin in Budapest,” Stephan Maichl from Landesbank Baden-Wuerttemberg said.
Maichl added that investors were positioning themselves on the safe side but that those moves could reverse if there is no concrete result, as it was the case after the first summit in Alaska.
Defence stocks have helped to push the STOXX 600 13% higher this year, hitting successive record highs on the back of the prospect of a swell of government spending on regional security.
But the picture on Friday was different: Germany’s Rheinmetall, Hensoldt, Renk were all down around 6%.
Italy’s Leonardo, Sweden’s Saab fell between around 4% and 5%, while Europe’s biggest defence company by market capitalisation BAE Systems was down 3.4%.
(Reporting by Anna Pruchnicka and Emanuele Berro, editing by Alun John)
