Germany's cancellation of F126 frigate program triggers European defence stock sell‑off

Reports indicate that Berlin is weighing the abandonment of its plan to build six F126 frigates, a multi‑billion‑euro project that would have been the largest German warship programme since World War II. The prospect of cancelling the contract sparked a sharp sell‑off in European defence equities on Wednesday.

German weapons maker Rheinmetall, a major beneficiary of the programme, fell up to 13% in early trading, while peers Hensoldt and Renk dropped 5% and 3.8% respectively. Shares of other defence firms also slipped: Sweden's Saab down 3.1%, Italy's Leonardo down 3.7%, and Britain’s BAE Systems down 1.6%. In contrast, the German shipbuilder TKMS, expected to receive orders for smaller frigates, saw its stock rise more than 11%.

The broader European markets mirrored the weakness, with the STOXX 600 edging down 0.04% and the Euro Stoxx 50 falling 0.19%. The German DAX fell 0.77%, while the UK FTSE 100 and France’s CAC 40 made modest gains. The sell‑off occurred alongside a technology sector pull‑back on Wall Street, where major chip and AI firms such as Nvidia slipped more than 4%, heightening concerns about the sustainability of recent AI‑driven investment inflows.