Shares of European arms companies are losing between 5 and 10% today, although there is no immediate cause or information that could have caused such a large sell-off. Anonymous Frankfurt traders quoted by Reuters indicated that all signs point to likely profit-taking and increasingly higher valuations.
- Losing ground today are the shares of German defense conglomerate Rheinmetall (RHM.DE), which tumbled nearly 10% and are currently losing 7%. The shares of optoelectronics and combat systems manufacturer Hensoldt (HAG.DE) are also trading under pressure. Also under pressure are Sweden's SAAB (SAABB.SE), which is losing almost 9%, and Italy's Leonardo (LDO.IT), which is trading down 6%. French conglomerate Dassault Aviation (DAS.FR) is doing slightly better, with its shares losing about 2%.
- A Goldman Sachs report indicated that the average benchmark of defensive companies is trading at 20x expected earnings, a 45% premium to the broad Stoxx index of European equities, although historically the valuation of defense stocks has been 10% below it.
- In a special report, analysts cited increasingly challenging valuations, and while they are positive on armaments and spending by European countries, they indicated that they expect a weaker 2025 for the industry. As a result, strategists conveyed that they are not recommending exposure to the sector to clients, pointing to valuations and the recent rally. The European Aerospace and Defense Index posted its weakest session since March 2023.
Rheinmetall (D1 interval)
Source: xStation5
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