LIVE MARKETS-Are Europe's 'Defense Seven' the new 'Magnificent Seven'?

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ARE EUROPE'S 'DEFENSE SEVEN' THE NEW 'MAGNIFICENT SEVEN'?

Hopes for higher defense spending in Europe after Germany unveiled a bumper fiscal bazooka, and uncertainty in the Russia-Ukraine conflict has sent investors flocking to the region's defense stocks.

Trading platform eToro created a basket of the top seven European defense stocks - London's BAE Systems BAES.L and Rolls-Royce RR.L, Germany's Rheinmetall RHMG.DE, Italy's Leonardo LDOF.MI and Paris-based Thales TCFP.PA, Dassault Aviation AM.PA and Safran SAF.PA - as the European equivalent to the crown jewel of U.S. equities called the Magnificent Seven.

According to figures by eToro, the 'Defense Seven' has gained about 46% so far this year, outperforming the 'Mag Seven'. The Solactive U.S. Mag 7 index .MAG is now down 16% YTD.

The defense group has also performed better over the last five years, with a 268% jump compared to around a 225% advance in the U.S. group.

Traders have soured on the "Mag Seven" this year, which includes Nvidia NVDA.O, Microsoft MSFT.O, Apple AAPL.O, Amazon.com AMZN.O, Alphabet GOOGL.O, Meta Platforms META.O and Tesla TSLA.O.

The group has had a rocky start to the year as gains following President Donald Trump's re-election faded, and breakthroughs in cheap Chinese AI hit expectations for future demand.

Moreover, both the benchmark STOXX 600 .STOXX and the U.S. benchmark S&P 500 .SPX have underperformed the 'Defense Seven' with a 6.4% gain and a 4.7% loss respectively so far this year.

"Over the past 5 years, investors have grown used to US big tech being top of the class... lackluster earnings reports, a looming trade war and mounting competition from China have all weighed on their performance so far in 2025," said Lale Akoner, global market analyst at eToro.

"Investors are increasingly diversifying away from these tech giants, exploring opportunities in sectors like defence, finance, and healthcare, as well as other regions like Europe."

The 'Mag 7' - last year's poster children for U.S. exceptionalism - have shed about $1.57 trillion in value so far this year, as per London-based AJ Bell.

(Purvi Agarwal)

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