Today, 09:58

Defense sector stocks are down this Monday. Reason: Donald Trump confirmed he would meet Vladimir Putin on Friday, August 15, in Alaska. With every signal of a possible calm in Ukraine, the market anticipates a slowdown in military orders: pressure eases on the stocks.

Immediate reaction on the Stock Exchange (Europe)

  • Paris: Thales drops 1% around 10 a.m. (after –4.6% at the very start of the session). Dassault Aviation gives up 1% (after –2.2% at the beginning).

  • Frankfurt: Hensoldt declines by 2%. Rheinmetall drops 4.4%.

  • Milan: Leonardo decreases by 1.3%.

  • BAE Systems also declines by 1.3%.


Last week already, the entire sector had suffered after the Kremlin mentioned a meeting "in the coming days" between Vladimir Putin and Donald Trump in Moscow. This prospect revived the idea of a truce in Ukraine, leading to a retreat in defense stocks.

The meeting, without Ukraine at the table

  • Framework: Summit Putin–Trump confirmed, Friday, August 15, in Alaska. Reuters recalls that Donald Trump indicated that a ceasefire was close in Ukraine.

  • Exclusions: neither the Ukrainian president Volodymyr Zelensky, nor the European Union would participate.

  • European reactions:

    • Emmanuel Macron: "The future of Ukraine cannot be decided without the Ukrainians."

    • Kaja Kallas (head of European diplomacy) calls for an extraordinary meeting of foreign ministers: "Any US-Russia agreement must include Ukraine and the EU; it is a matter of security for Ukraine and for Europe."

Moreover, Donald Trump has suggested that a ceasefire agreement could involve an exchange of territories. Volodymyr Zelensky rejected this idea.

Analysts' reading

In a note published before the opening of European markets, Jefferies anticipates new pressure on European defense stocks today.

Important nuance: due to the lack of a planned tripartite meeting, Jefferies does not believe in an imminent ceasefire and does not think it would undermine the upward trend in defense spending in Europe. The bank sees it as an investment opportunity in medium/long-term growth stocks, especially as they have already corrected last week.

Exposure to conflict: Rheinmetall case

According to an October note from Oddo BHF, Rheinmetall derives about 20% of its defense revenue from contracts related to Ukraine. Hence an increased stock market sensitivity to news from the diplomatic front.

Performance since the beginning of the year

  • Thales: +63.6%

  • Rheinmetall: +153%

These rises are explained by the multiplication of military budget increases in Europe. Under American pressure, and because the United States claims to be less inclined to ensure alone the security of the Old Continent, Europe is rearming. Germany, for example, has announced hundreds of billions of euros in defense investments.

Long-term budget cap (NATO)

In June, NATO member countries committed to invest 5% of their GDP in defense by 2035, against a previous target of 2%.

Royal Bank of Canada calculates that such a target would represent about $2,000 billion in annual increases in NATO defense spending, which equates to an average annual growth rate of about 8% between 2024 and 2035.


To remember (ultra-readable version)

  1. Political signal: summit Putin–Trump on August 15 (Alaska), without Ukraine or the EU; hypothesis of ceasefire mentioned, exchange of territories rejected by Zelensky.

  2. Market Impact: the defense stocks drop (Thales, Dassault, Rheinmetall, etc.), then they partially recover.

  3. Expert View: Jefferies does not expect any immediate agreement and confirms the upward trend of defense budgets; possible buying window.

  4. Structural: European rearmament ongoing; target NATO 5% of GDP by 2035; RBC figure +2,000 billion $/year (+8%/year on average).


Same message, smoother reading: the prospect of a truce gives the sector short-term relief, but the budgetary dynamics remain favorable in the medium/long term.