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Germany Scraps Frigate Program, Rheinmetall Plummets
24 Jun
Summary
- Rheinmetall shares dropped nearly 19% after Germany canceled a frigate program.
- Germany will now pursue smaller frigates from Thyssenkrupp's marine unit.
- European shares saw mixed performance, influenced by U.S.-Iran negotiations and commodity prices.
European shares experienced a muted performance on Wednesday, with investors closely monitoring developments in U.S.-Iran negotiations. The continent's benchmark STOXX 600 index saw a slight increase of 0.1%.
Significant stock movements were noted in the defense sector, as Germany announced the cancellation of a landmark program to build six F126 frigates. This decision led to an 18.7% drop in Rheinmetall shares, marking its largest one-day decline. Consequently, Berlin has opted to acquire smaller Meko A-200 frigates from Thyssenkrupp's marine subsidiary, which saw its stock jump 16%.
Commodity-linked sectors were among the biggest decliners, with mining and energy stocks falling due to a dip in metal and oil prices. The real estate sector, however, experienced a substantial rise, driven by a $16.6 billion bid for Segro from U.S.-based Prologis.
On the economic front, German business morale showed improvement in June, with companies expressing increased optimism about their current situation. Traders also watched for signals regarding the monetary policy direction from global central banks, with expectations of a further 25-basis-point rate hike by the European Central Bank by year-end.
