European Stocks Dip as Powell Flags High Valuations; Defense Shares Rally on Trump’s Ukraine Comments
European markets slipped on Wednesday morning as investors digested a warning from U.S. Federal Reserve Chair Jerome Powell about inflated equity valuations, even as defense stocks rallied on fresh political developments surrounding the war in Ukraine. The pan-European Stoxx 600 index fell 0.2% by mid-morning in London, with most sectors trading in the red, reflecting cautious sentiment across the region.
Defense equities provided a bright spot amid the wider market weakness. The Stoxx Europe Aerospace and Defense Index gained around 1% after U.S. President Donald Trump signaled a stronger backing for Ukraine in its conflict with Russia. Germany’s Renk saw shares jump nearly 5%, while Sweden’s Saab climbed 4.5% and German defense tech firm Hensoldt advanced 4%.
Trump’s remarks marked a notable shift in tone on the conflict. In a post on his Truth Social platform, the president said he believed Ukraine, with European and NATO support, could reclaim all its original territory from Russia. He also met with Ukrainian President Volodymyr Zelenskyy at the United Nations General Assembly in New York on Tuesday, reiterating support for NATO members defending their airspace against Russian incursions.
Meanwhile, Powell’s comments weighed on investor confidence globally. Speaking on Tuesday, the Fed chair cautioned that “by many measures” equity prices appeared “fairly highly valued,” a statement that unsettled traders already concerned about stretched valuations and potential interest rate moves. His remarks sparked declines in Asia overnight and left U.S. stock futures flat early Wednesday.
The combination of geopolitical headlines and valuation worries underscores a volatile backdrop for European investors. While defense-related names benefited from shifting political dynamics, most other sectors lagged, suggesting markets are still searching for direction amid global uncertainty and ongoing central bank scrutiny.
source: cnbc