Europe’s Defense Rally Is Just Beginning, Says Morgan Stanley
European defense stocks are rallying as Germany prepares to greenlight more defense spending, and Morgan Stanley analysts say there are bigger gains ahead.
The bank’s analysts named Rheinmetall AG as their top pick, saying the German maker of military tanks may surge more than 50% in the next 12 months. Their analysis shows that European defense stocks have a pattern of soaring in the first few months of the year, according to a note published on Tuesday titled “Tis the Season for EU Defence.”
German lawmakers are expected to approved a record €52 billion ($61 billion) in military contracts next week as the Trump administration ramps up pressure on Ukraine to accept a peace deal that would end the war. News of that on Tuesday sparked about a 4% jump in a Goldman Sachs Group Inc. basket tracking European defense. The shares have been under pressure in recent weeks as talks of a ceasefire progressed.