European defence stocks fall on talk of Ukraine peace plan

Adds fund manager comment, updates prices

By Danilo Masoni

MILAN, Feb 6 (Reuters) - Shares in some European defence companies fell sharply on Thursday, with traders citing growing talk over a possible Ukraine peace plan ahead of a meeting between Russian President Vladimir Putin and U.S. President Donald Trump.

A gauge of aerospace and defence stocks turned suddenly negative after Reuters reported, citing Russian state news agency RIA, that preparations for a meeting between Putin and Trump were at an "advanced stage".

RIA cited Leonid Slutsky, head of the State Duma's international affairs committee, as saying the meeting could take place in February or March.

"If the Putin-Trump meeting is imminent, it's logical to assume that there will be pressure to bring a swift resolution to the conflict with Ukraine," said Carlo Franchini, Head of Institutional Clients at Banca Ifigest in Milan.

Trump and Putin have both said they are keen to hold a meeting whose agenda could include Trump's stated aim to bring a swift end to the Ukraine war.

Saab AB SAABb.ST, Rheinmetall RHMG.DE, Hensoldt HAGG.DE, Leonardo LDOF.MI, Thales TCFP.PA and BAE Systems BAES.L were last down between 1 and almost 4%.

Their declines pushed the STOXX Aerospace and Defence index .SXPARO, which has more than doubled since Russia invaded Ukraine in February 2022, down as much as 1.4% from a record high hit earlier in the session.

The rouble currency strengthened against the dollar RUB= and even more so against the Chinese yuan CNYRUB= on Thursday, buoyed up by talk of possible talk between Moscow and Washington.

The broader STOXX 600 .STOXX was up 0.8%.

Analysts have said a ceasefire in Ukraine could trigger a selloff in the sector, but investors remain upbeat about the defence spending outlook in NATO countries.

Franchini said declines in defence stocks could create "buying opportunities". "Let's not forget that Trump wants NATO members to increase defence spending to 5% of GDP," he said.

U.S. allies expect Trump's administration to present a plan to end Russia's war on Ukraine at the Munich Security Conference in Germany next week, Bloomberg reported on Wednesday, citing people familiar with the matter.