Defense Stocks Under Pressure as Markets Await Outcome of Talks in Moscow

Financial markets are clearly in a wait-and-see mode today, awaiting the outcome of talks between US Special Envoy Steven Witkoff and Vladimir Putin, with any rumours of progress in the negotiations quickly translating into movements in the euro, European indices and the industrial and defence sector. Investors are discounting the growing likelihood of even a framework agreement or a lasting ceasefire, treating it as a potential game-changer for risk premiums in Europe.

At the same time, the very fact that the market is increasingly pricing in a more optimistic resolution to the conflict is acting as a brake on the share prices of European defence companies. After months in which the defence sector benefited from record orders and increased security spending, the recent wave of headlines about peace plans has triggered profit-taking and a correction in industry indices, even though there is still no sign of a lasting breakthrough on the battlefield.

What can we expect from today’s talks?

Two possible paths can be considered. Firstly, Putin may take a stand against President Donald Trump’s peace plan. The immediate market reaction would be the opposite of what we saw last week, i.e. a rebound in the euro, frontline currencies, including the Polish zloty, and growth in the broader European market, with the exception of raw materials, industrial and defence companies. Alternatively, Putin could signal his willingness to negotiate. At first glance, this is positive news, but not necessarily. Putin has an incentive to enter into talks without immediately agreeing to the terms of the agreement. Given that Ukraine has already shown a willingness to enter into talks, Russia has an interest in dragging out the negotiations in order to obtain greater concessions.

Let us also remember that even the 30-day partial ceasefire agreement reached in March was broken almost immediately. Therefore, even a peace agreement agreed upon by all parties may not survive the final test.

Shares in German defence giant Rheinmetall (RHM.DE) are losing ground during today’s session and remain below the 200-day exponential moving average (gold curve on the chart). Interestingly, this technical level has not been tested by the market since November 2024. Source: xStation

The material on this page does not constitute financial advice and does not take into account your level of understanding, investment objectives, financial situation or any other specific needs. All information provided, including opinions, market research, mathematical results and technical analyzes published on the Website or transmitted To you by other means, it is provided for information purposes only and should in no way be construed as an offer or solicitation for a transaction in any financial instrument, nor should the information provided be construed as advice of a legal or financial nature on which any investment decisions you make should be based exclusively To your level of understanding, investment objectives, financial situation, or other specific needs, any decision to act on the information published on the Website or sent to you by other means is entirely at your own risk if you In doubt or unsure about your understanding of a particular product, instrument, service or transaction, you should seek professional or legal advice before trading. Investing in CFDs carries a high level of risk, as they are leveraged products and have small movements Often the market can result in much larger movements in the value of your investment, and this can work against you or in your favor. Please ensure you fully understand the risks involved, taking into account investments objectives and level of experience, before trading and, if necessary, seek independent advice.

Register a Revolut Business Account