FRANKFURT (dpa-AFX Broker) - Key stocks in the German and European defense sector could face pressure on Tuesday following a cautious analyst note. In pre-market trading on the Tradegate platform, Rheinmetall shares were down 0.6 percent compared to their Xetra close. Shares in Hensoldt and Renk were also trading in negative territory.

After a prolonged period of optimism, Morgan Stanley has downgraded its view on the industry to a neutral 'Equal-weight' rating. While strategist Marina Zavolock noted that she remains positive on the sector over the long term, she argued that the current lack of momentum cannot be ignored. There is a dearth of further catalysts regarding earnings expectations and price targets. However, she emphasized that fresh momentum could emerge later in the year.

The downgrade is part of a broader strategy report featuring several shifts: the experts have turned bearish on Medical Technology and Life Sciences, while adopting a bullish stance on Capital Goods and Metals & Mining. Semiconductor stocks remain the US bank's top picks, alongside Commodities and Financials./tih/stk

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