Ukraine-exposed stocks rally, defence dips on Ukraine peace hopes

• Ukraine-exposed stocks surged: Raiffeisen Bank gained 6%, Wizz Air rose 9%, and Ferrexpo soared 19%, while European materials and construction stocks climbed as much as 2.9%
• Defense stocks dropped sharply with the index falling 2.3% (largest daily decline since early December), as Saab fell 4.3% and Rheinmetall declined 3.7%
• The meeting between Zelenskiy and Trump in Davos focused on security guarantees and post-war recovery plans, marking the first formal peace negotiations involving all three parties

Summary: Ukraine-Exposed Stocks Rally on Peace Deal Hopes

Key Development:

European stocks with significant Ukraine exposure surged Thursday after Ukrainian President Volodymyr Zelenskiy announced the first trilateral meeting between Ukrainian, Russian, and U.S. officials. The announcement followed discussions between Zelenskiy and U.S. President Donald Trump in Davos on January 22, 2026, covering security guarantees and post-war recovery plans.

Market Winners:

Companies expected to benefit from war resolution posted strong gains:

• Ferrexpo (Ukraine-exposed miner): +19%
• Wizz Air (airline): +9%
• Raiffeisen (Austrian bank): +6%
• TUI (travel firm): +4%

European materials and construction stocks index rose 2.9%, with Buzzi, Heidelberg Materials, and Rockwool leading gains.

Market Losers:

Defense stocks declined sharply as peace prospects dimmed sector outlook:

• European defense stocks index: -2.3% (largest daily drop since early December)
• Saab: -4.3%
• Rheinmetall: -3.7%

Defense stocks faced additional pressure after Trump backed away from European tariff threats and ruled out forcibly taking Greenland.

Market Implications:

The sharp divergence reflects investor repositioning based on reduced geopolitical risk. Companies with Ukraine exposure or those hurt by the conflict rallied on reconstruction and normalization prospects, while defense contractors—previously benefiting from increased military spending—retreated. This pattern typically emerges when markets perceive increased likelihood of a peace agreement.

The sector rotation suggests investors are pricing in potential de-escalation, though actual peace terms remain uncertain.