LIVE MARKETS-Defence selloff: Citi advises buying the dip

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DEFENCE SELLOFF: CITI ADVISES BUYING THE DIP

Hopes of a Ukraine ceasefire have pulled European defence stocks down 20–40% from their October peaks, but Citi views the selloff as overdone and advises looking at buying the dip.

"This share price weakness could prove an investment opportunity," says analyst Charles Armitage at the Wall Street bank, arguing that Europe's need for military deterrence will keep defence spending on an upward path.

"Any ceasefire would be the start of a timer, where Russia is likely to begin regenerating its capabilities and Europe will need to increase defence spending in order to deter Russia from acts of aggression."

Germany is targeting 3.5% of GDP by 2029 (six years ahead of NATO's goal) and both NATO and EU mutual defence clauses demand credible capabilities, Armitage notes.

Citi expects this structural trend to underpin long-term earnings, even though the market seems to have been disappointed by guidance for 2026.

The analyst highlights Hensoldt's 60% exposure to Germany means growth is "more assured" and, with sector valuations now easier, says there is "value to be found across the sector."

A gauge of European aerospace and defence stocks .SXPARO was down 3.5% this morning, hitting fresh 5-month lows. Top fallers included RENK R3NK.DE, Airbus AIR.PA, Hensoldt, Rheinmetall RHMG.DE, Leonardo LDOF.MI and Saab SAABb.ST.

More on the same topic:

Defence shares cool off; BofA sees a buying window

EU Defence: investors want proof before paying up - MS

(Danilo Masoni)

EARLIER ON LIVE MARKETS:

MIXED START, DEFENCE STOCKS LAG CLICK HERE

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RATE HIKE PROSPECT ARRESTS YEN DECLINE, FOR NOW CLICK HERE