DE40: Defence companies sector loses after reports of spending cuts by German government

• DAX fluctuates around Friday's close
• Germany plans to cut spending on military aid to Ukraine in 2025
• Varta records about 50% price drop 

Today's European market remains decidedly quieter than the previous week. The major indexes continue to rise, coming close to fully closing the price gap from early August. Going forward, one of the most important topics from the perspective of investors remains the outlook for the US economy and its possible soft landing. More light on the economic situation will be shed by Jerome Powell's speech at the end of this week in Jackson Hole. 

On the German stock market, companies in the defence sector are down. According to the German government's announcement, the budget plan calls for a halving of military aid spending for Ukraine. According to reports from Reuters, aid from Germany in 2025 is expected to be €4 billion compared to €8 billion in 2024. Partial compensation for the reduction in aid is to be made up by the use of frozen Russian assets, but for now the market has taken the German government's spending cut plan negatively. Rheinmetall is losing more than 2.2% today, Hensoldt -4%, and BAE Systems is down 2.2%. 

On the other hand, positive reports regarding spending support in the development of green energy and the announcement by Minister of Economy and Climate Protection Robert Habeck of a “comprehensive biomass package” are having a positive effect on the listings of companies in the green energy sector. The company with the strongest gains today is Verbio (+8.5%). 

Stocks included in the DAX index. Source: Bloomberg Finance L.P. 

The discretionary goods sector is the best performer on the German stock market today, posting a 0.9% gain. The index is also supported by real estate (+0.9%), while basic goods and IT lose about 0.4%. Source: Bloomberg Finance L.P. 

The price increase of the DAX index contract (DE40) has slowed slightly after a strong last week. Currently, the price of the contract stops near the key resistance zone at 18400 points. If the quotations break through this resistance, a continuation of the rise to the vicinity of the July consolidation zone is possible, and the next important resistance level remains 18640 points. However, it is worth noting that the contract currently has a series of strong increases behind it, hence a temporary halt or even a slight correction is possible as part of the realization of short-term gains. Source: xStation 

Company news: 

• Varta (VAR1.DE) is down more than 50% today on details regarding the battery manufacturer's restructuring plan. The main goal remains debt reduction, which is planned to reduce debt to €200 million (vs. the current €485 million). The next step in the plan is to reduce Varta's share capital to zero, suggesting that existing shareholders will no longer be part of the new company. At the same time, the plan calls for Varta's delisting from the stock market. According to press reports, Porsche is also expected to become involved in the company's restructuring process. 
  Bavarian Nordic (BAVA.DK) announces accelerated production of vaccines against the mpox virus with the WHO's declaration of mpox as a “global health threat.” The company told the African Centers for Disease Control and Prevention (Africa CDC) that it is capable of producing 10 million doses of the vaccine by the end of 2025, while it would already be able to deliver 2 million units this year.