The world is not close: JPMorgan deemed Europe's defense stock sell-off hasty
The sell-off in European defense stocks, which have fallen about 10% over the past month, was "unwarranted and provides a compelling entry point into the sector," according to JPMorgan analyst David Perry. His opinion is published by MarketWatch.
Perry's note comes after the sector's securities intensified their decline on Wednesday, Nov. 19, due to reports from sources Axios, Financial Times, The Wall Street Journal and Politico about a new peace plan for Ukraine that the U.S. is discussing with Russia.
Why JPMorgan is confident in the sector
Perry believes that the European defense sector will benefit regardless of whether the plan is implemented.
On the one hand, the details of the plan are likely to be unacceptable to Ukraine unless there is a radical change of heart in Kiev, which means the end of the conflict may not be that close, the JPMorgan analyst suggested in a MarketWatch statement.
On the other hand, in the "unlikely event" that a peace agreement is signed in the near future and in accordance with the terms under discussion, it will essentially be a victory for Russia, MarketWatch writes, citing Perry. And this, according to the analyst, will only lead to an even greater increase in defense spending in Europe.
In his note, Perry referred to an article in the Financial Times, which claims that neither Ukraine nor other European countries were involved in the preparation of the cease-fire proposals. The JPMorgan analyst believes Ukraine is unlikely to agree to give up territories it still controls, give up key weapons and halve the size of its armed forces. This is what the plan, which the FT claimed US presidential special envoy Stephen Whitkoff tried to persuade Ukrainian President Vladimir Zelensky to accept, envisages. Bloomberg's source claims that Zelensky received signals from the US that he should agree to the proposed deal. US President Donald Trump supports the plan, a senior US official told the agency.
In Perry's opinion, hostilities will continue at least until 2026: he came to this conclusion based on conversations with defense experts and his political contacts. The analyst recommended that Europe urgently build up its military defense capabilities so that its security would no longer depend on U.S. generosity.
Context
The decline in European defense stocks on Wednesday came despite a forecast from German arms and military equipment maker Rheinmetall, MarketWatch noted. The company expects its revenue to increase fivefold by 2030 from 2024 levels (€9.8 billion) thanks to robust demand from Europe's rearmament.
This article was AI-translated and verified by a human editor
