Reports that Germany intends to scrap a plan to build six warships, a project that would have constituted the country's largest naval procurement order since World War II, triggered a sharp sell-off in defense stocks across multiple nations on Wednesday.
The news that Germany is shelving the six-ship construction program has sparked investor concerns that the earnings boost for defense contractors from increased government military spending may not fully materialize, leading to a significant downturn in the global defense sector.
According to a report citing two informed sources, Berlin is planning to axe a multi-billion-euro project to build F126-class frigates. This order would have been Germany's most expensive warship procurement contract since the Second World War.
Rheinmetall, a German arms manufacturer and a primary beneficiary of the government's major defense contracts, saw its shares plunge by as much as 13% in early trading. Other German-listed companies were also hit: Hensoldt fell 5% and Renk Group dropped 3.8%. Shares of Sweden's Saab declined 3.1%, Italy's Leonardo slipped 3.7%, and UK defense giant BAE Systems was down 1.6%.
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