(Update: new details on Iran conflict, share price performance)
FRANKFURT (dpa-AFX) - Rheinmetall shares, which have recently been under pressure, moved higher on Monday. After recently hitting their lowest level in a year near the 1,100-euro threshold, they gained 4.5 percent in afternoon trading, making them the top performer on the Dax. Citigroup recommended buying the shares again after they had lost approximately 45 percent from their record high.
Additional tailwinds for the broader market were provided by reports that further potential solutions are being exchanged regarding the conflict in Iran. According to Iranian media, the U.S. side is reportedly prepared to temporarily ease oil sanctions against Tehran. This is considered a central demand by Iran for agreeing to a peace deal and reopening the Strait of Hormuz.
The sector environment turned positive as a result: trailing Rheinmetall among German sector peers in the mid-cap MDax, Renk rose by 1.8 percent. TKMS gained one percent, while Hensoldt shares climbed 0.4 percent. Saab was also upgraded to 'Neutral' by Citigroup, with its shares rising two percent in Stockholm.
Citigroup expert Charles Armitage assumes that the recent price declines across the entire sector were largely driven by hopes for a peace agreement in Ukraine - alongside concerns regarding the financing of increased defense spending in Europe. While both arguments are understandable, he believes they are exaggerated.
The war is currently viewed as being at a stalemate. Following the recent ceasefire, Russia and Ukraine have once again subjected each other to massive air strikes. According to Russian reports, Ukraine launched heavy attacks on the Moscow region on Saturday night. Russia responded to the massive Ukrainian drone attacks during the night with counter-strikes.
Armitage continues to see Russia as a threat to Europe even in the event of an end to the war in Ukraine. Sweden and Germany would then be among the few countries in Europe capable of increasing their borrowing to finance additional defense spending. Other countries are more financially constrained and would be forced to take less popular steps, such as tax increases or budget cuts./tih/ag/niw/he
