European defense stocks were crushed in early Tuesday trading. This drop came on the heels of an overwhelming wave of optimism regarding peace negotiations for Ukraine punctuated by a meeting between then-President Trump and Ukrainian President Zelenskyy. The military-industrial complex was not in a good position to contend with these changes. Renk was down 6.5%, Leonardo was down 4.6%, and Saab was down 4.2%. These companies were some of the most underperforming stocks on the index during the session.
Trump’s comments during today’s meeting reinforced the idea that peace negotiations should be able to move forward even in the face of active hostilities between Ukraine and Russia. He raised a red flag by calling for security guarantees for Ukraine and adding, with no explanation, that the European countries would “deliver” those guarantees. In short, he said the guarantees would need US coordination. He pledged to put these plans down on paper in the next week to ten days.
This drop in defense stocks occurs amid a broader market environment that is similarly mixed. Continued negative spillover from Wall Street, with Asia-Pacific markets trading mixed overnight. U.S. stock futures were down modestly early Tuesday, a move that was an extension of the cautious tone that has settled over the markets.
Investors are awaiting key speeches from Federal Reserve officials this week, as central bank leaders prepare for the Fed’s annual economic symposium set to begin on Thursday in Jackson Hole, Wyoming. This was expected to set the stage for clues on the future course of monetary policy, steering the markets even more.