Defense stocks slide again, as Germany’s naval U-turn shakes confidence in Europe’s rearmament boom

European defence shares extended losses on Thursday, as investors continued to reassess betting on Europe's rearmament boom after Germany scrapped a flagship naval programme. Rheinmetall fell again and peers, including Hensoldt and Renk , also retreated. Berlin's U-turn on the F126 program, which could have been worth more than 12 billion euros for which Rheinmetall had been expected to become the lead contractor, is now exposing a key risk to Europe's defense trade. "This news reminds us that [governments] can and do change their minds," JP Morgan analysts led by David Perry said Wednesday. Shares of Rheinmetall fell 1% following a 18% drop on Wednesday. German peers Hensoldt and Renk dropped 3.5% and 1.7% respectively, also following losses in the previous session. Stock Chart Icon Stock chart icon Rheinmetall, Henk and Hensoldt shares in the year-to-date. Most of Europe's leading defense companies were in the red on Thursday morning, extending Wednesday's losses. Only Saab and Rolls-Royce made gains, each of less than 1%. Why the F126 decision matters for defense stocks The F126 cancellation emphasized to markets that, while defense spending may have driven the sector's rally in recent years, government procurement remains political, unpredictable, and subject to shifting military priorities. Perry noted the major difference between the defence sector and other sectors: the customers are essentially always sovereign governments, whose financial priorities change. …