On Wednesday, defense stocks experienced a sharp decline following a report from the Financial Times indicating that Germany plans to scrap its multi-billion-euro project to construct six F126 frigates, which would have been the largest warship commission since World War II. Instead, Germany will opt to purchase eight smaller Meko A-200 frigates.
This shift has negatively impacted major defense contractors, particularly Rheinmetall, which saw its stock drop as much as 14% in morning trading. Rheinmetall was expected to lead the F126 program, a contract valued at up to 12.8 billion euros ($14.5 billion), pending approval from the budget committee.
Other defense stocks also fell, with Hensoldt down 2.9%, Renk down 4%, Saab down 2.6%, Leonardo down 3.5%, and BAE Systems down 1.6%. The pan-European Stoxx 600 index was down 0.1%. This downturn reflects broader concerns among investors regarding the sustainability of defense spending, especially as the sentiment shifts with the potential end of conflicts in Ukraine and the Middle East.
The overhaul of the F126 program poses a significant setback for Rheinmetall and Germany's defense ambitions, which include a commitment to establish the 'strongest conventional army in Europe' by 2039