LIVE MARKETS-Morgan Stanley flags buying case for EU defence
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MORGAN STANLEY FLAGS BUYING CASE FOR EU DEFENCE
European defence stocks have lagged in recent months and seen heightened volatility since conflict in the Middle East began, but Morgan Stanley says the investment case for the sector is stronger than ever.
After a strong start to 2026, European defence stocks are now trading around 20% below recent highs on average. Valuations have de‑rated, with forward price‑to‑earnings multiples easing to about 20 times from peaks near 23.
The U.S. bank argues the pullback is out of step with fundamentals and offers an attractive entry point.
“Recent geopolitical events (including Iran, Greenland, Venezuela) reinforce a case for increased European defence spending and greater strategic autonomy,” analysts including Ross Law and Marina Zavolock wrote.
Morgan Stanley says the weakness is largely sentiment‑ and positioning‑driven, with the sector caught up in broader equity de‑risking.
Geopolitics still point in Europe’s favour, the bank says, with strains in transatlantic relations, uncertainty over U.S. support for Ukraine and higher oil prices supporting a stronger Russian fiscal stance all bolstering the case for higher European defence spending.
Share prices and forward PEs for stocks including RENK R3NK.DE, Hensoldt HAGG.DE, Rheinmetall RHMG.DE, Saab SAABb.ST, Leonardo LDOF.MI, Thales TCFP.PA and BAE Systems BAES.L are on average 19% and 17% below prior peaks.
(Danilo Masoni)
EARLIER ON LIVE MARKETS:
UBS WARNS OF FURTHER UPSIDE RISKS FOR ENERGY CLICK HERE
SOFTWARE EARNINGS: NO 'TURNING POINT' IN SIGHT CLICK HERE
DE-DE-ESCALATION CLICK HERE
EUROPE BEFORE THE BELL: HEADING FOR AN UGLY OPEN CLICK HERE
PRIME-TIME DISAPPOINTMENT CLICK HERE
