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CNBC
2 hours ago
- CNBC
Trump's meeting with Putin is a win-win for European defense stocks, no matter the outcome
European defense stocks have further to run regardless of whether U.S. President Donald Trump and Russian counterpart Vladimir Putin achieve a breakthrough on the war in Ukraine later this week, market watchers say. Trump and Putin are slated to meet in person in Alaska on Friday, with a view to discuss what it would take to end the more-than-three-year conflict that began with Russia's full-scale invasion of Ukraine in early 2022. Reports that the two heads of state would meet buoyed broader European equities on Thursday, but sank regional defense stocks . Concerns about Russian aggression had contributed to decisions by European governments and the NATO military alliance to drastically hike their defense budgets, benefiting security companies operating in the region . So far this year, the Stoxx Europe Aerospace and Defense index has surged by 52%. Following three consecutive days of losses after the Trump-Putin summit was announced, the index regained some ground, and was last seen trading 1.3% higher in Thursday's session. Market watchers told CNBC that a deal to end the fighting in Ukraine — which may not be on the horizon of Friday's meeting — was unlikely to throw Europe's defense growth off course. 'Win-win' for defense stocks In emailed comments to CNBC on Wednesday, Dmitrii Ponomarev, product manager at VanEck EU, pointed to a recent Financial Times report that Europe is "building for war," with arms sites expanding at roughly thrice the pace struck during peace time. He labeled this as "evidence that the current ramp is broader than Ukraine resupply alone." "No firm would add that much capacity if it depended only on Ukraine shipments; the bigger driver is NATO Europe's pivot to modernization and restocking under the new 5% of GDP long-term goal, of which about 3.5% is the truly comparable "core" defense spend, anchoring multi-year demand," he said. "Even with a peace deal, stockpiles don't magically refill: governments still face years of munitions and air-defense replenishment, so revenues likely shift from short-term surge programs toward steadier replenishment, sustainment, and long-horizon modernization." VanEck runs a $6.9 billion Defense ETF, which includes stakes in some of Europe's biggest defense stocks. Among the fund's top holdings are Italy's Leonardo , France's Thales and Sweden's Saab . Ponomarev said that companies that rely more heavily on deliveries to Ukraine or supplying short-cycle munitions "may feel a sharper de-rating if urgency fades" from any potential breakthrough emerging from this week's Alaska summit between the Russian and U.S. leadership. "[But] more diversified primes with long-cycle programs, services, and sustainment should be better placed to absorb near-term volatility," he said. Asked on Monday whether the European defense boom remained a long-term story regardless of the outcome in Ukraine, Christopher Granville, managing director of TS Lombard, said he "strongly agrees" that the momentum has further to run. "My call on European defense stocks since about 2023 — when it became clear that the Russian military was extremely powerful and was not going to be rolled out of those territories in eastern and southern Ukraine — has been buy on any weakness, on any temporary pullback, because this is a win-win for European defense stocks," he told CNBC's "Squawk Box Europe." Granville pointed out that either the negotiations would go off the rails on Friday — an outcome that he labeled "more than perfectly possible, if not likely" — or peace would be struck. The former would result in the need for America and Europe to replenish their arms inventories, he said, while the latter would lead to "a very powerful Russian military." "Although the words victory and defeat [would] be bandied around, [this would be] a Russian military which has to an extent, prevailed," he said. "That reality will force a continued increase in defense procurement by European governments, and it's also good for European defense stocks. Either way, it's a winner." Granville noted that markets had been discounting the second scenario's ability to benefit defense companies. "From time to time, those names pull back a bit — you should buy on that weakness in my opinion," he advised. 'At least a decade' of rearmament Defense company leaders have been telling CNBC in recent weeks that an end to the Ukraine war would be unlikely to derail the boost to European defense spending. In conversation with CNBC's "Worldwide Exchange" on Monday, Dimitrios Kottas, co-founder and CEO of Greek autonomous defense tech developer Delian Alliance Industries, said the timing of Europe's consensus to modernize defense capabilities was correlated with the invasion of Ukraine, but argued that this rearmament would last "at least a decade." "It's something that is driven by historical macroeconomic forces, [that are] much stronger than the current ongoing invasion in Ukraine," he said. Micael Johansson, CEO of Swedish defense giant Saab , meanwhile insisted the growth in European defense was "absolutely" a long-term trend. "I have a hard time seeing, after all that happened with the invasion in Ukraine and the aggressive neighbor that we have to the east … even if we get a ceasefire or peace deal that is reasonable with Ukraine, that [governments] would step back and say it's over," he said in an interview with CNBC toward the end of July. Earnings misses and downgrades The bull run this year hasn't been a continuously upward trajectory, even without questions surrounding the future of Ukraine. Shares of German arms manufacturer Rheinmetall shed 8% on Thursday, after the firm's earnings came in below expectations . The company said contracts had not been awarded during the reporting period given the election of a new government in Germany, but noted that an anticipated influx of orders in the second half of 2025 meant Rheinmetall was able to confirm its full-year guidance. Rheinmetall is one of the best performers in European defense this year, with its shares gaining roughly 160% over the course of 2025. In a Friday note, Deutsche Bank's Christoph Laskawi argued that Rheinmetall's second-quarter result "does not change the investment case by any means." "The order intake potential ahead remains significant and the win rate should be high which is the basis for sizeable revenue growth in the coming years," he said. Back in June , Citi's European Aerospace and Defence analyst Charles Armitage downgraded Hensoldt, Renk and Saab — whose shares have all more than doubled in value this year — to give them a "sell" rating. He argued at the time that the companies were "pricing in more growth than seems likely." A lot of optimism nevertheless still remains in the sector. "It's no surprise [defense] share prices have jumped sharply this year, maybe to unsustainable levels in the short term and a welcome resolution or ceasefire in Ukraine may see their prices soften," Neil Birrell, chief investment officer at U.K. investment management firm Premier Miton, told CNBC by email. "However, the spend on defence and related infrastructure is here to stay and will be taking place over the coming years and decades. The move to greater … regional self-reliance for defence, energy, food and raw materials is a very long-term one. Defence stocks will be big beneficiaries of that."
CNBC
5 hours ago
- CNBC
How Putin could try to outmaneuver Trump when they meet
Russian President Vladimir Putin's standing in the West may be pretty low, but he's a skilled and seasoned statesman who shouldn't be underestimated, analysts say — and he's likely to be looking to outmaneuver his less experienced U.S. counterpart when the leaders meet in Alaska on Friday. Putin and U.S. President Donald Trump are meeting to try to negotiate an end to the war in Ukraine, but close followers of Moscow's leadership are skeptical that any lasting resolution will be reached at the summit. "Let's be clear, Putin does not take Trump seriously," Tina Fordham, founder of Fordham Global Foresight, told CNBC ahead of the talks. "He has ramped up attacks, including on civilians in urban centers over the summer, and that has upset Trump and frustrated him, and frankly, it's humiliating," Fordham said, adding that meeting Trump would be "a low-cost photo op for Putin, who has a real track record of manipulating Trump administration officials." Ukraine and its European allies (who have not been invited to the talks) also argue that Putin is not serious about ending the conflict of more than three years. Kyiv's leadership also claimed this week that intelligence suggests Russia is preparing to mount new offensives , rather than preparing for a ceasefire or peace. CNBC contacted the Kremlin for a response to the claims and is awaiting a response. Military analysts cited several reasons that Russia might not want to end the war before it needs to, such as its forces' relatively advantageous position on the battlefield despite high attrition rates; entrenched position in Russian-occupied regions in the south and east of Ukraine; and ability to throw more manpower into the fight. Maximum concessions It's therefore likely that Putin will try to extract the as many concessions and benefits for Russia as he can from the United States when he sets foot on American soil for the first time in almost a decade. "The Russian side will likely seek to broaden the agenda beyond Ukraine, emphasizing the potential for strategic geopolitical and economic cooperation — including lucrative energy deals and potential arms control or strategic weapons treaties," Andrius Tursa, Central and Eastern Europe advisor at risk consultancy Teneo, said in emailed comments this week. "The Kremlin likely hopes that the transactional nature of Trump's approach to foreign policy will help advance Putin's objectives in Ukraine, such as territorial concessions, restrictions on Ukraine's sovereignty and military capabilities, and replacement of its political leadership," he added. The Kremlin's awareness of Trump's transactional nature when it comes to deal-making is likely to underscore how Putin approaches him during talks, and Putin is a skilled negotiator, according to Christopher Granville, managing director at TS Lombard. "Putin is always skillful in using 'give and take,'" he told CNBC's " Squawk Box Europe " on Monday. "True, Putin's got a big win [by being invited to Alaska] and securing negotiations on a deal before a ceasefire," he said, "but he's given Trump something." "He's given the impression that Trump's hardline has worked, that Putin has offered concessions on territorial swaps ... and that's already a sign of this skillful 'give and take' — or illusion of 'give and take'' —which President Putin has deployed so successfully on many occasions in the past," he said. Trump showed weakness A potential source of weakness for Trump as he heads into the meeting is that Putin will recognize that the U.S. president has, despite repeated threats, resisted heaping more punitive sanctions on Moscow even though it refused a ceasefire with Ukraine that was supported by both Washington and Kyiv. In fact, Trump has so far preferred to punish Russia's friends and trading partners such as its oil buyer India — rather than Russia itself — with higher tariffs and the threat of "secondary sanctions." "Putin is smart enough to recognize that Trump is turning up the heat, but it's very significant that Trump decided to turn up the heat on his friend [Prime Minister] Narendra Modi in India, and not on Putin himself," Fordham told CNBC. "It tells us that President Trump is very reluctant to actually put the pressure directly on Putin, so much so that he's willing to jeopardize this relationship with India, which is a hugely important ally within the wider context of U.S.-China relations," she added. Trump has also been accused of showing his cards to Russia by suggesting that Washington could entertain the notion of Ukraine "swapping" some territory with its neighbor, a suggestion that has provoked consternation in Europe, which has urged Trump not to concede too much to Putin. Kaja Kallas, the EU's foreign policy chief, told CNBC on Tuesday that Putin was stringing Trump along and was just " pretending to negotiate ." CNBC has asked the Kremlin to respond to the claim. Russia's economy helps But although Putin appears to be entering the talks from a position of strength rather than weakness — a position not many global leaders find themselves in when meeting Trump — the Russian president could arguably be looking for an off-ramp as Russia's economy and citizens labor under the weight of international sanctions, labor shortages and rampant inflation, which even Putin described as "alarming." ″[Putin] starts from a relatively strong position on the battlefield. They're advancing," Richard Portes, head of the economics faculty at the London Business School, told CNBC Monday. "On the other hand, from the economic point of view, he starts from a weak position. The Russian economy is not in very good shape. They're running a significant fiscal deficit, partly because oil revenues are down very substantially, oil and gas [are down] because of the oil price. And ... this is a weak economy," Portes told CNBC's " Europe Early Edition. " Michael Froman, president of the Council on Foreign Relations and former U.S. trade representative, told CNBC that Putin could agree to a ceasefire, but only if Trump offers serious concessions on Russia's oil exports, which have come under sanctions and restrictions, including an oil price cap. "I think if Putin comes in and says, 'Alright, I'm willing to accept a ceasefire, but you got to relieve the pressure on my oil sales,' well, that's a deal that that could be talked about, right? That's the president using leverage to get Putin to come to the table, to do something he was not willing to do before, which is to accept an unconditional ceasefire, and that would put an end to the fighting." "If the president is able to come back from Alaska with a ceasefire, that will be a significant achievement, if it they start getting into trading territory at Ukraine's expense, then it's not going to be a very good or sustainable agreement," Froman said.
Business Insider
5 hours ago
- Business Insider
Agco CEO: We've been managing our costs and inventories proactively
In an interview on CNBC's Mad Money, Eric Hansotia said Agco (AGCO) has eliminated the grains and protein business which allows it to implement share buybacks. Global farming is at a trough, so there is lots of upside ahead, he noted. He sees Brazil as a strong growth opportunity for the company. Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence. Published first on TheFly – the ultimate source for real-time, market-moving breaking financial news. Try Now>>
