European defense stocks have once again come under pressure. Rheinmetall, Thales, and TKMS are showing weaker price momentum, while the general market environment is also becoming more challenging. The UMBRELLA Strategy has reacted selectively: Thales was completely sold, Rheinmetall and TKMS remain under observation, and Micron Technology was added as a new position.
Why are European defense stocks falling?
European defense stocks are once again under selling pressure. Rheinmetall, Thales, and TKMS have all recently declined.
The broader European stock market is also under pressure. Rising oil prices due to new tensions in the Middle East have intensified inflation concerns. At the same time, market participants are positioning themselves more cautiously ahead of the ECB’s monetary policy decision. On September 9, the DAX, along with other major European indices, fell, with Rheinmetall and Thales among the weaker stocks.
Another factor is gaining importance for European defense stocks: valuation.
After the strong revaluation of the sector in recent years, expectations have risen significantly. High order backlogs and increasing European defense spending remain important long-term drivers. However, they are no longer sufficient on their own to support stock prices at every valuation level.
Current market commentaries refer to the combination of high valuations and weaker short-term price momentum. Morgan Stanley recently downgraded its assessment for the European defense sector from Overweight to Equal Weight.
This leads to an important distinction:
The short-term market and chart picture of European defense stocks has weakened, while the structural long-term defense story has not necessarily changed.
Thales: Technical Weakness Leads to Exit
Thales was completely sold from the UMBRELLA Strategy on September 8 at prices around EUR 231.
The decision followed a persistent deterioration of the technical picture.
The stock has moved towards the lower Bollinger Band, while the MACD remains negative. The RSI has fallen to around 25, technically placing it in the oversold area.
Against this background, the position was removed from the UMBRELLA Strategy.
Rheinmetall: Key Support Comes into Focus
Rheinmetall remains part of the UMBRELLA Strategy and currently has a share of approximately 3.1%.
However, the stock remains under close observation.
The RSI is around 35, signaling weak price momentum, but not yet an extremely oversold situation. At the same time, the MACD remains negative.
For the UMBRELLA Strategy, this means that the long-term commitment to the defense sector via Rheinmetall will be maintained for now. However, the technical situation requires close observation.
TKMS: Defense Exposure with a Different Technical Picture
Even TKMS is directly connected to the defense industry.
The company focuses on maritime defense, including submarines, surface vessels, and maritime defense technologies. Its long-term development is therefore closely linked to international defense spending and the modernization of maritime capabilities.
TKMS currently holds a share of approximately 2.6% in the UMBRELLA Strategy.
The technical picture has also weakened.
After rising to around EUR 104, the stock has corrected significantly and is currently trading at approximately EUR 84.
The RSI is around 43. This indicates weaker price momentum but does not yet signal an oversold situation. The MACD is negative, confirming that short-term momentum remains under pressure.
From Thales to Micron: Exposure Shifts Towards AI Infrastructure
The exit from Thales was accompanied by another important adjustment.
Micron Technology was newly added to the UMBRELLA Strategy on September 8. The new position currently has a share of approximately 3.0% in the strategy.
Key Takeaway
The current weakness in European defense stocks does not automatically mean that the long-term defense thesis has changed. However, the combination of high valuations, weaker momentum, and a more challenging market environment has increased short-term risks.
| Date | Event |
|---|---|
| September 10 | US Producer Price Index (PPI) |
| September 10 | ECB Interest Rate Decision |
| September 10 | ECB Press Conference & Economic Forecasts |
| September 11 | US Consumer Price Index (CPI) |
