DE40: Moderate recovery in European equities. Uncertainty over defence stocks.

• Europe recovers from yesterday’s selloff

• U.S. military spending cut weighs on defense stocks

• Renault beats estimates amid sector-wide stagnation

• Infineon secures German government aid for a new semiconudctor plant

European indices mostly rebound following yesterday’s selloff triggered by a sudden deterioration of Trump-Zelensky diplomatic relations. German DAX is up 0,6%, though it has lost some of its morning upward momentum, French CAC40 adds 0,7%, while British FTSE 100 trades 0,25% lower. Euro Stoxx 50 index adds 0,67%.

Defense stocks with high U.S. exposure, like BAE Systems (BA.UK: -2%), QinetiQ (QQ.UK: -0,45%), and Leonardo (LDO.IT: -0,2%) may be under pressure today as U.S. Defense Secretary Pete Hegseth plans to cut military spending by 8% over five years. U.S. stocks like Northrop Grumman (NOC.US: -1.8%) and Palantir (PLTR.US: -10%) fell on the news, erasing recent sector gains. 

Intraday performance of DAX sectors. Source: Bloomberg Finance L.P.

Intraday change of DAX members. Source: Bloomberg Finance L.P.

Volatility currently observed on the wide European market. Source: xStation5

DE40 (H1 interval)

Contracts for the German DAX index have been recovering gradually since the opening, though the momentum wore off once the price hit exponential moving averages (EMAs, in purple) around 22600 mark. RSI got back to neutral (around 50), which may signal a medium term halt before the index returns to its upward trend. Nevertheless, as long as DE40 trades below EMAs the recent rally may see further corrections.

Source: xStation5

Corporate news:

• Airbus (AIR.FR: -1.28%) targets 820 deliveries in 2025, up 7%, but faces supply chain issues, weak space business, and potential U.S. tariffs. Supplier struggles delay A350 freighter to 2027. Airbus explores European space sector consolidation and plans job cuts. Despite challenges, it maintains leadership over Boeing in commercial jet deliveries.

• Carrefour's (CA.FR: -7.95%) 2024 results fell short of expectations, leading to weak 2025 guidance. The company expects slight growth in EBITDA, operating income, and free cash flow for the year, while its adjusted net income dropped 11%. Carrefour is conducting a strategic review, which includes acquiring full ownership of Carrefour Brazil. It also announced a €1.2 billion cost-saving plan and a 6% increase in its dividend. The firm is facing challenges in France, where price sensitivity among consumers remains high, but expects growth in Latin America.

• Infineon (IFX.DE: +2.8%) secured €920M in German state aid for a €3.5B semiconductor plant in Dresden, approved by the EU. The plant will produce industrial, automotive, and consumer chips. Infineon committed to supporting EU semiconductor development, R&D, crisis preparedness, and SME access. The aid aims to bolster Europe’s chip supply security.

• Knorr-Bremse's (KBX.DE: +5.2%) Q4 EBIT of €216.5 million exceeded estimates, despite a 13% YoY decline. Revenue fell 4%, while orders rose 1.4%. The company forecasts operating EBIT margin of 12.5%-13.5% and 2025 revenue between €8.1B-€8.4B. It plans increasing dividends and may incur up to €50M restructuring costs in 2025.

• Mercedes-Benz (MBG.DE: -2,1%) forecasts a sharp earnings drop in 2025 and plans a 10% cost reduction by 2027 amid weak demand and EV struggles. 2024 EBIT fell 30%, with margins down to 8.1%. Trade tensions and potential U.S. tariffs pose further risks, while new models and an S-Class refresh aim to revive demand.

• Renault (RNO.FR: -1.5%) posted a record operating profit of €4.3B for 2024, exceeding expectations, driven by cost savings and successful new launches like the electric R5. Revenue rose 7.4% to €56.2B. The company lowered 2025 margin expectations due to stricter EU carbon emissions targets but remains optimistic about future prospects.

• Siemens AG (SIE.DE: +1.3%) is selling a 2% stake in Siemens Healthineers, offering 22M shares to raise €1.2B. The sale supports its $10.6B Altair acquisition. Demand was high, and Siemens also plans to sell a €2.5B stake in Siemens Energy. Barclays, BNP Paribas, and Morgan Stanley are arranging the deal.