Peace plans for Ukraine sink European defence stocks

(Il Sole 24 Ore Radiocor) - A shower of selling on European defence stocks, which fell to their lowest levels since early September. In Milan, Leonardo - Finmeccanica is among the worst performers in the Ftse Mib, but outside the main basket also hurt Fincantieri and Avio. However, the sell-offs did not only hit Italian stocks: in Frankfurt, Renk, Hensoldt and Rheinmetall, Thales down in Paris, Bae Systems suffers in London and Saab falls in Stockholm. The European defence index moves down more than 3% after having risen more than 200% since Russia started the war against Ukraine in February 2022.

Penalising the sector are the new developments on the Ukrainian front after President Volodymyr Zelensky said he was ready to work 'honestly' on a US-backed plan to end the war. For JP Morgan analysts, the plan is not acceptable to Ukraine or its European allies, and they called the recent selloff of defence companies an "interesting entry point" into the industry. "If the US succeeds in imposing this plan (which we think is unlikely), we think it would amount to a de facto victory for Russia, pushing European defence spending even higher than expected and at a much faster pace," they wrote.