(BFM Bourse) – Defense groups are faltering on the stock market this Tuesday, notably Thales which shows the biggest drop in the CAC 40. A decline to be linked to press information reporting the examination of a truce proposal by the Hamas.
The defense groups are very clearly the compartment in difficulty this Tuesday. Thales shows the biggest drop in the CAC 40 with a drop of 4% at the start of the afternoon while Dassault Aviation drops 3%.
Less exposed to defense, Airbus and Safran are still poorly oriented. The aircraft manufacturer lost 2.2% while Safran lost 2%.
The movement is not limited to Parisian values. In London, BAE Systems lost 3.9% while in Frankfurt, Hensoldt fell 7.6% and Rheinmetall lost more than 6%.
“There could be several reasons why European defense stocks are down today,” says Philip Buller, aerospace and defense industry analyst at Berenberg.
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“First, headlines have been reporting a potential ceasefire in the Middle East. It is unclear at this point what the actual outcome of these headlines will be. But the easing of geopolitical tensions is never a good thing for defense stocks. And it can give some investors an excuse to take profits on stocks that have performed well, like Rheinmetall (+83% over the whole of 2024, Editor’s note)” , he continues.
According to AFP, Hamas is studying this Tuesday a proposed truce in the war against Israel accompanied by the release of hostages held in the Gaza Strip.
More precisely, on the occasion of yet another session of negotiations in Cairo, the mediating countries – Qatar, Egypt, United States – put on the table a new proposal in three stages, the first of which provides for a six-week truce, according to a Hamas source cited by AFP.
“Second, a Bloomberg report mentions more fiscal constraints for defense budgets,” continues Philip Buller.
“Third, a note from Goldman Sachs indicating that the defense sector is now fully valued may also weigh on stocks, adds the Berenberg analyst.
The specialist, however, wants to be confident despite today’s declining context. “We maintain, however, that defense spending will see a greater proportion of investment in Europe within these restricted budgets, and we believe that European defense valuation levels are attractive at these levels, and we would be buyers on this unexpected weakness” in the sector, explains Philip Buller.
Julien Marion – ©2024 BFM Bourse
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