European defense stocks slide as Trump-Zelenskyy meeting raises hopes of peace for Ukraine

Defense stocks were among the worst performers in the index during early trade, as investors digested the news of talks in Washington. The Stoxx Europe Aerospace and Defense index was last seen trading 2.2% lower.

German tank parts manufacturer Renk was 6.7% lower, Italian defense giant Leonardo shed 6.6%, Germany’s Hensoldt lost 6% and Sweden’s Saab was down 5.5%.

At the closely watched talks on Monday, Trump said peace negotiations can take place while both countries are still fighting, dropping his earlier calls for a ceasefire. He also said security guarantees for Ukraine would be “provided” by European countries with “coordination with the U.S.”

Zelenskyy said a package of coveted security guarantees for Ukraine — expected to include a massive purchase of American weapons — would be “formalized on paper within the next week to 10 days.”

The U.S. president also said a meeting between Russian President Vladimir Putin and Zelenskyy is being planned, to be followed by a trilateral meeting which will include Trump.

Asia-Pacific markets traded mixed overnight following declines on Wall Street, while U.S. stock futures ticked down early Tuesday ahead of key speeches from Fed officials this week.

Central bank officials from around the globe will convene in Jackson Hole, Wyoming, for the Fed’s annual economic symposium which begins Thursday. Investors are awaiting clues from Fed Chair Jerome Powell as to what will happen at the central bank’s remaining policy meetings this year.

The Fed funds futures market is indicating an 83% chance for a quarter-point rate cut at the Fed’s next policy meeting in September, according to CME’s FedWatch tool.

There are no major earnings or data releases in Europe on Tuesday.