European arms stocks and gas longs collapse at the same time
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Defense stocks across Europe are crashing again, this time side by side with the fastest unwinding of gas long positions since winter 2023, with arms manufacturers and energy bulls both getting hit. The sell-off comes after markets briefly rallied Tuesday on the back of talks held in Washington between U.S. President Donald Trump, Ukrainian President Volodymyr Zelenskyy, and senior European officials, according to CNBC. By 8:20 a.m. in London, the Stoxx 600 index was already down 0.3%, with every major European sector in the red. This followed Tuesday’s green session, when markets initially responded positively to the outcome of Trump’s White House meeting with Zelenskyy and a bloc of European leaders. But that enthusiasm didn’t carry into Wednesday, especially for the defense sector, which was already losing ground the day before. The Stoxx Europe Aerospace and Defense index shed another 0.9% in early trading, after already dropping 2.6% during Tuesday’s session. Germany’s Rheinmetall fell 1.8%, and Hensoldt was down 1.9%. In the UK, Rolls-Royce lost 1.9%, while Qinetiq dropped 2%. These names were among the weakest in the index, despite the fact that Rheinmetall had been one of the top performers in the DAX earlier in the year. Diplomacy triggers retreat from defense names “Speculation about a diplomatic breakthrough meant that European assets saw some sizeable moves [on Tuesday], particularly those most affected by the conflict,” said Jim Reid, a strategist at Deutsche Bank, in a Wednesday morning note. The weakness in defense came as markets digested hotter-than-expected U.K. inflation data, which showed consumer prices rising 3.8% in the year to July. The print initially pushed the British pound higher against the U.S. dollar, before it erased gains and settled flat. Long positions on European gas futures were also getting wiped out. In the last five weeks, net-long bets on…
Filed under: News - @ August 20, 2025 1:30 pm