European arms makers fall to lowest since September on Ukraine peace push

European defense shares fell to their lowest levels since early September on Friday, after Ukrainian President Volodymyr Zelenskyy said he was ready for “honest” work on a US-backed plan to end the war.

An index of aerospace and defense companies was last down 2.6 percent.

The index, which has risen more than 200 percent since Russia launched its war against Ukraine in February 2022, was heading for its biggest weekly losses since mid-October.

Shares in Germany’s Renk fell around six percent, on track for a sixth straight day of losses.

Hensoldt and Rheinmetall were both down around four percent.

Italy’s Leonardo, Sweden’s Saab slipped between around two percent and three percent.

JPMorgan analysts wrote in a note earlier this week they saw the plan as not acceptable to Ukraine or its European allies and viewed the recent selloff in defense companies as a “compelling entry point” into the sector.

“If the US is able to impose this plan (which is unlikely, in our view) we think it would amount to a de facto victory for Russia, driving European defense spending even higher than planned and at a much faster pace,” they wrote.