(Bloomberg) — Defense stocks bore the brunt of Monday’s selloff across European equity markets as a broad flight from risk assets sucked the air from what has been the region’s top-performing sector this year.
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Germany’s Rheinmetall AG (RHM.DE) slid as much as 27%, the steepest one-day drop ever, before quickly paring the decline to about 8%. Other stocks sliding included France’s Thales SA, Germany’s Hensoldt AG (HAG.DE), Italy’s Leonardo SpA and Sweden’s Saab AB (SDV1.F).
The sector’s big gains this year made it an obvious target for investors seeking to reduce exposure to risk assets in light of President Donald Trump’s tariff announcements. A Reuters report that US peer Howmet Aerospace Inc. (HWM), which supplies parts for planes built by Airbus SE (AIR.PA) and Boeing Co. (BA), declared a force majeure following Trump’s tariffs further soured the mood.
“Hope has collided with reality for defense names in Europe,” said Chris Beauchamp, chief market analyst at IG Group. “Increased defence spending has yet to actually materialize, and we are in a firesale situation now for stocks as a whole.”
The sector has been the biggest gainer this year as European nations have pledged to spend more on defense amid worries the US could walk back its security commitments to the continent. A Goldman Sachs Group Inc. basket of pure-play European defense shares is still up nearly 50% on the year.
—With assistance from Joshua Gaunt-Warner.
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