(BFM Stock Exchange) – Sector shares are retreating this Monday, July 28 after Donald Trump said that Europe would buy “hundreds of billions of dollars in military equipment” in the United States during the announcement of the trade agreement with Europe. Thales can also suffer from a malicious act with regard to Naval Group, of which he has 35% of the capital.

Criticized or even criticized by some, the trade agreement between the European Union and the United States acts a number of concessions from the Old Continent.

In exchange for customs duties limited to 15% (compared to 30% from August 1 in the absence of text), Europeans have committed to buy for $ 750 billion in energy products in the United States and to increase their investments in the country by $ 600 billion, over several years.

Another announcement has gone a little more unnoticed. During the presentation of the “deal” with the president of the European Commission, Ursula von der Leyen, Donald Trump said that Europeans would buy for “hundreds of billions of military equipment” American. According to the BBC, these expenses are included in the $ 600 billion in investment promised in the United States.

This information has somewhat put European defense groups on the stock market under pressure. In Frankfurt, Rheinmetall, who provides armored vehicles to the German army, lost 2% in the early afternoon after dropping more than 4% at the start of the session. Hensoldt, specialist in sensors and military optronics, abandons 3.5% after losing more than 6% in the morning. In London Bae Systems abandoned 1.2%. In Paris Thales lost more than 3%, accusing the highest drop in CAC 40.

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Strong increases in budgetary expenditure

“The declaration on the fact that Europeans could buy more US military equipment is what lowers the stocks in the sector in Europe. But we do not know the amount and we do not know if these are decisions that have already been decided,” said an analyst.

Let us recall that European countries, Germany in the lead, have multiplied the announcements of increases in military budgets, which propelled the titles of the defense sector (Rheinmetall, for example, has been 178% since the start of the year).

In June the Organization of the North Atlantic Treaty (NATO) acted a new target of security expenditure, at 5% of the gross domestic product (GDP) by 2035, against a previous objective of 2% previously. This incorporates 3.5% of GDP for defense and 1.5% for wider safety expenses (infrastructure, networks, innovation).

Jefferies calculated that these new targets could represent more than $ 800 billion spending more compared to the current situation.

In terms of Europeans, it is likely that a significant, if not important, part of these new expenses benefit from the United States. As Oddo BHF noted in a note dating from last March, between “mid-2022 and mid-2023, 78% of the total expenses of military equipment (Europeans, editor’s note) were monopolized by non-European suppliers, including 63% in the United States”. “Between 2021 and 2022, military sales from the United States to Europe increased by 89%,” added the design office.

Even if Europeans would rebalance these expenses to their own industrialists (Oddo BHF retained a rate of at least 50% market share for European suppliers in 2030), increases in European military budgets will bring American players in the sector.

Malicious act at Naval Group

Note that in the case of Thales, the drop in the title can potentially be also due to an act of maliciousness which targeted the naval naval construction company Group. A hacker claimed to have secret documents belonging to the company, threatening to disseminate them.

The company, it said, noticed “none” an intrusion into its computer environments “at this stage”.

“In an international, commercial and information under tension context, generating an intensification of attempts at destabilization, Naval Group notes being the target of a reputational attack, characterized by the claim of an act of malicious cyber,” argued the group in a declaration sent to several media including News Bulletin 247.

“With regard to the facts noted, the challenges of sovereignty of Naval Group and the need to protect the data of our customers, a complaint was filed to shed light on these acts of maliciousness,” added the company.

“Thales holds 35% of Naval Group and could therefore be assigned by this information today,” wrote Jefferies in a note published upstream of the opening of the Paris Stock Exchange this Monday.

Finally, the case of Dassault Aviation, which contrary to other defense groups, wins 2.3%. The Rafale designer and the Falcon business jets range benefits from a recovery of recommendation from Kepler Cheuvreux, who went to “keep” buying “on the title, according to Reuters.

Another positive point for the title: the agreement made between Europe and the United States plans to bring to 0% to customs surcharges on aeronautical exports.

“This should benefit today mainly in Dassault Aviation, because all other European civilian aeronautical manufacturers indicated when they publicize their first quarter results that the impact of customs duties would be largely contained in their forecasts,” writes Jefferies in a note.

“For Dassault, however, the fact that around a third of its Falcon deliveries are intended for American customers, all the devices passing through the finishing center in the United States, led to uncertainty about the level of the demand for business aircraft, because prices were necessarily going to increase to reflect customs duties,” said the bank.

During the company’s semi -annual results conference last week, his CEO, Éric Trappier had expressed his great concern for his business jet activity.

“The observation is clear:” competitiveness is in favor of the United States and this competitiveness will still be degraded if you have to absorb customs duties. Our operational margins are 6%, so customs duties, even at 10%, it doesn’t happen, it’s as simple as that, “he said.