European markets opened weaker on Wednesday as global sentiment softened, with defence stocks leading losses. The pan-European Stoxx 600 was trading 0.3% lower at 12:50 p.m. IST (8:20 a.m. London time), with most sectors and major regional bourses in negative territory.Defence names extended their slide from Tuesday, when optimism over a potential diplomatic breakthrough between US President Donald Trump, Ukrainian President Volodymyr Zelenskyy and European leaders pressured the sector.
On Wednesday, the Stoxx Europe Aerospace and Defence index slipped 0.9% in early trade. Germany’s Rheinmetall and Hensoldt dropped 1.8% and 1.9%, while Britain’s Rolls-Royce and Qinetiq shed around 2% each.“Speculation about a diplomatic breakthrough meant that European assets saw some sizeable moves, particularly those most affected by the conflict,” Deutsche Bank’s Jim Reid told CNBC International. “Defence stocks really struggled, and Rheinmetall posted the worst performance in the German DAX despite being the strongest performer over 2025 given the ramp-up in defence spending.”Also Read: Market Outlook: CLSA chartist expects Nifty to hit record highs provided it holds this key levelInvestors also weighed hotter-than-expected UK inflation, which rose 3.8% in July. Sanjay Raja, chief UK economist at Deutsche Bank, told CNBC International the surprise was driven by a sharp 30% rise in airfares. He cautioned inflation could touch 4% in September before easing but warned that the “path to 2% CPI next year looks narrower,” adding the Bank of England faces an “uncomfortable trade-off” between persistent price pressures and a slowing labour market.Globally, Asian markets tracked Wall Street’s overnight decline, while US futures were steady ahead of Federal Reserve minutes and key speeches at Jackson Hole. Traders are pricing in an 85% chance of a quarter-point Fed rate cut in September, according to CME’s FedWatch tool.
