Rising hopes for peace weigh on defense shares

Peace talks took place this weekend at the Mar-a-Lago estate between U.S. President Donald Trump and Ukrainian President Volodymyr Zelensky. Optimism has grown after Trump said that Ukraine and Russia are “closer than ever” to a potential agreement, raising hopes that a deal could soon be reached to bring the Russia-Ukraine conflict to an end. Nevertheless, caution and patience remain necessary, as a final resolution has yet to be secured.

In this regard, European defense stocks fell in morning trading, as investors priced in the possibility of reduced military spending should a formal peace agreement materialize. Shares of Leonardo dropped 4.5%, while Hensoldt and Saab declined by around 3%.

By contrast, European markets overall opened the final trading week of the year largely flat, with activity muted amid the Christmas holiday period.

More specifically, the pan-European STOXX 600 edged up 0.02% to 588.71 points at 08:20 GMT, easing from an earlier record high of 589.61. Germany’s DAX slipped 0.2%, while Britain’s FTSE 100 and France’s CAC 40 traded broadly flat.

In commodities, precious metals showed mixed movements. Silver briefly surged past the $80-per-ounce mark early in the session before retreating to $75.60, while gold fell 1.2% to $4,499 an ounce.

Trading conditions remained subdued, with no major European economic data or corporate earnings releases scheduled for the day.

Benedetta Zimone