Ukraine-exposed stocks rally, defence dips on Ukraine peace hopes

LONDON, Jan 22 (Reuters) - European stocks expected to benefit from an end to Russia's war in Ukraine rallied on Thursday, and defence stocks dropped after Ukrainian president Volodymyr Zelenskiy said Ukrainian and Russian teams will have their first trilateral meeting with U.S. officials.

Zelenskiy discussed security guarantees and a plan for post-war recovery during his meeting with U.S. President Donald Trump in Davos.

Austrian bank Raiffeisen RBIV.VI gained 6%, airline Wizz Air WIZZ.L and travel firm Tui TUI1n.DE rose 9% and 4% respectively, while Ukraine-exposed miner Ferrexpo FXPO.L soared 19%. An index European materials and construction stocks .SXOP rose as much as 2.9%, with Buzzi BZU.MI, Heidelberg Materials HEIG.DE and Rockwool ROCKb.CO among the top gainers.

All typically rally at times when markets see an increased prospect of a deal to end the war.

In contrast, an index of European defence stocks .SXPARO dropped 2.3%, set for its biggest daily fall since early December.

Saab SAABb.ST dropped 4.3% and Rheinmetall RHMG.DE 3.7%. Defence stocks had been under pressure already after Trump backed off tariff threats towards Europe and ruled out taking Greenland by force.