Europe midday: Defence stocks drag Stoxx 600 to two-week low
By Benjamin Chiou
Date: Tuesday 14 Oct 2025
(Sharecast News) - Selling pressure ramped up by Tuesday lunchtime in Europe, with stocks falling sharply across the continent, with the defence sector leading the way lower.
The Stoxx 600 was down 1.0% at 561.20 - on track for its lowest close since 30 September - with mild losses in London, Zurich and Madrid met with heavy losses of 1.2% or more in Frankfurt, Paris and Milan.
"Defence stocks continue to come under pressure, unwinding some of their gains after the landmark Middle East peace agreement was signed in Egypt yesterday," said Joshua Mahony, chief market analyst at Scope Markets.
"While Europe's long-term commitment to higher defence spending in response to Russian aggression remains intact, the near-term easing of Middle East tensions has taken some heat out of the defence sector."
Meanwhile, a rise in trade tensions between the US and China were also weighing heavily on the mood. After threatening to slap higher tariffs on Chinese imports on Friday - which sparked the biggest one-day sell-off on Wall Street in six months - Donald Trump has since attempted to assuage concerns, saying "All will be fine [...] The USA wants to help China, not hurt it."
However, new measures imposed by Beijing - including restrictions on five US subsidiaries of South Korea's Hanwha Ocean following Washington's probes into the Chinese shipping industry - will have only re-escalated the spat.
A level of risk aversion ahead of a barrage of earnings from the US banking sector was also weighing on stocks, with results from JP Morgan, Goldman Sachs, Citigroup and Wells Fargo due out on Tuesday.
In economic news, German inflation was confirmed at a nine-month high in September, with final estimates on Tuesday showing an increase in price pressures in line with the flash reading. The harmonised consumer price index increased at a year-on-year rate of 2.4% in September, according to the Federal Statistical Office, up from 2.2% in August and 2.0% in June and July.
Meanwhile, the ZEW Indicator of Economic Sentiment, which tracks the expectations of analysts and institutional investors about Germany's economic situation, showed a increase to 39.3 in October from 37.3 in September, slightly lower than the 40.5 level pencilled in by the market.
In the UK, Worldpanel data showed that like-for-like grocery price inflation was 5.2% in the four weeks to 5 October, up from 4.9% in September and on par with July's record high.
Market movers
Defence stocks were weaker across the board, including Rheinmetall, Renk, Babcock, BAE Systems, Rolls-Royce, Saab, Airbus and Safran.
French tyre giant Michelin was extending losses made on Monday after slashing its full-year guidance for operating income to just €2.6bn-3.0bn, down from a previous forecast of more than €3.4bn, citing the impact of US tariffs and weak trade in North America. Deutsche Bank said the reduction was "far bigger than expected".
The news also hit sector peers Pirelli and Continental.
London's mining stocks were also falling sharply, including Anglo American, Antofagasta and Glencore.
Heading the other way was telecoms group Ericsson after suggesting that it might raise shareholder returns as a results of a strong third quarter, with solid recurring cash flow and the sale of its Iconectiv unit contributing to a strong cash position.
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